Is Navy on the crest of a new IT buying wave?

Is Navy on the crest of a new IT buying wave?

By Tony Lee Orr

GCN Staff

When it awarded the $6.9 billion Navy-Marine Corps Intranet contract this month, the Navy took the first step in an outsourcing journey that many agencies likely will follow.

Outsourcing is not new in the government, but the NMCI contract that the Navy awarded to Electronic Data Systems Corp. this month is unparalleled. Under the five-year contract, the service plans to foist on EDS as many of its communications services and basic information technology needs as possible.

Navy Secretary Richard Danzig said the outsourcing effort will let the service treat IT as it would any other utility. The goal is an end-to-end system for transmitting voice, video and data communications.

Not our job

'We need to stop trying to create it ourselves and move to buying it like we do our electricity,' Danzig said of Navy and Marine Corps network services.

The contract ultimately could be worth $16 billion if the service exercises all its options, Navy officials said. Beyond the five-year base period, the contract has three one-year options.


The intranet will help manage security, Navy Secretary Richard Danzig says.


It took the service longer than expected to award the contract. The original plans called for a June award date, but concerns raised by Congress delayed the buy (see story, Page 45). Navy officials, however, said they expect to make up lost ground during the early phases of the project.

EDS will handle the bulk of the contract work, and the service estimates that subcontractors will perform about 35 percent.

The Navy will migrate to NMCI services first, followed by the Marine Corps in 2003.

Essentially, the Navy has sold its IP infrastructure to EDS, which will own and operate it, Danzig said.

The move will consolidate more than 200 networks, said Joseph R. Cipriano, the Navy's program executive officer for information technology and its IT enterprise acquisition manager.

The Navy spends $1.6 billion a year on information services and communications, Danzig said. The new system will save money through central procurement and management, he said.

Initial focus

EDS will initially concentrate its efforts on the Naval Air Systems Command, taking over NAVAIR's network, Cipriano said. Once that work is complete, the Navy will spend three months evaluating the program and working out any kinks, he said. If everything goes as expected, the Naval Sea Systems Command will migrate its comm services to EDS in April or May, Cipriano said.

NAVAIR asked to be the first to use the new service because it had put a number of upgrades on hold pending the NMCI award, Danzig said.

The Marine Corps now spends $190 million per year running and maintaining its own intranet services, said Gen. James L. Jones, Marine commandant. When the Corps migrates to the EDS service in 2003, those funds will be used to pay for the links, he said.

The Navy, in an unusual move, selected a second vendor as a backup if the EDS contract runs into problems. But the Navy declined to identify the runner-up from among the losing bidders: Computer Sciences Corp., General Dynamics Corp. or IBM Corp.

Other agencies' systems chiefs said they think the Navy is on the cusp of a federal trend and that agencies will increasingly hand off the bulk of their IT services to vendors.

The government should focus on governing and let the private sector deal with IT headaches, said George Molaski, chief information officer at the Transportation Department.

'I challenge the notion that government should be in the IT business at all,' Molaski said this month at the Industry Advisory Council's Executive Leadership Conference in Richmond, Va. 'It is not our core competency.'

Harold Gracey, vice president for government affairs for FedBid.com of Germantown, Md., and the former CIO at the Veterans Affairs Department, agreed.

'What [agencies] should do is focus on mission delivery,' Gracey said.

'The government is not in the business of IT or financial management or the running of data centers. We should let the things that are a natural for the private sector be done by people who have that as a business,' he said.

Outsourcing IT resolves more than technological problems, its proponents argued.

Besides wiring the Navy with a servicewide network, the new intranet will help it manage computer security, Danzig said. Security specialists will be able to monitor and manage one central environment rather than ride shotgun over hundreds of disparate networks, he said.

NMCI also will let the Navy refresh its technology more frequently and less expensively, Danzig said.

And, as competition grows fierce for a shrinking pool of high-tech workers and the government suffers a glut of 37,000 IT jobs over the next three years, many federal CIOs said they are looking to outsourcing as a personnel Holy Grail.

More than 1,900 Navy employees now maintain 360,000 desktop PCs and associated networks, Danzig said. The Navy plans to shift most of those employees to other jobs, but EDS will offer about 300 civilian employees jobs, he said.

'Technology workers are a valuable commodity,' Navy CIO Dan Porter said.

Technology workers within the service will be assigned other duties that are more aligned with the Navy's primary mission, he said.

Gracey said he anticipates other agencies adopting similar philosophies.

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