Navy's $6.9 billion intranet almost a reality

Computerworld (US online)

Officials from the U.S. Navy and Electronic Data Systems Corp. (EDS), the prime contractor for the multibillion-dollar Navy/Marine Corps Intranet (N/MCI), said Tuesday that more than 80 percent of the planned number of N/MCI desktop seats will be deployed by the end of this year, allowing the service to claim an initial victory in what has been and may still be a turbulent journey.

Speaking here at the first Navy/Marine Corps Intranet Industry Symposium, Rear Adm. Charles Munns, director of N/MCI, said that to date 75,000 seats have been successfully transitioned to the intranet and another 215,000 are now being shifted from thousands of legacy applications and proprietary networks to the single, standardized and integrated intranet owned and operated by EDS.

"N/MCI has taken hold and is moving forward," said Munns. "It's more than half in place now, and by the end of the year it will be essentially there."

N/MCI is a US$6.9 billion IT outsourcing contract, often referred to as seat management, that will give the Navy and Marine Corps secure, universal access to integrated voice, video and data communications. Plano, Texas-based EDS won the contract in October 2000. However, technical difficulties, deployment delays and user complaints have hampered the program since its inception.

The Navy's progress report comes on the heels of a $126 million quarterly net loss reported by EDS in May (see story). The company blamed various "problem contracts," including N/MCI, for a whopping $334 million pretax loss. In addition, Bill Richard, EDS's enterprise client executive, is now warning that the company may not turn a profit at all on the N/MCI contract.

"Will we turn a profit on it? It will probably be closer to break-even," said Richard.

However, retired Air Force Lt. Gen. Al Edmonds, president of EDS's U.S. Government Solutions unit and a former director of the Defense Information Systems Agency, tried to dispel rumors that the N/MCI contract is in trouble.

"We, the N/MCI Strike Force at EDS, are here to stay," said Edmonds, adding that recent financial losses reported by the company are simply temporary accounting adjustments required by new laws and regulations passed by the U.S. Securities and Exchange Commission.

"This program is healthy. If I were to go back to do anything differently, I would start sooner," said Edmonds. He acknowledged that the program lost critical time during the change in presidential administrations.

Despite Edmonds' positive outlook, challenges still lie ahead for the program, including the potential for congressionally mandated budget cuts that could have a significant effect on the contract -- particularly on the number of N/MCI seats purchased by the Navy.

The House Armed Services Committee recently placed a provision in the Defense Authorization Bill calling for a $168 million IT budget reduction. And while the House version of the bill must still be reconciled with the Senate version in a House-Senate conference session, the House provision remains a big concern for both the Navy and EDS.

"Something of the magnitude of $168 million would equate to around a 10 percent reduction, or about 35,000 seats," said Richard. "That is an impact, and one that we have to look at very seriously."

Rear Adm. Munns said the proposed budget cuts are aimed at redundant programs and programs with poor management track records -- two areas that N/MCI has been designed to fix for the Navy. However, the possibility of having to cancel seat deployments that are already under way "is problematic," he said.

The Navy could also be looking at canceling additional seats, or delaying those scheduled to be rolled out in fiscal 2004, Munns said. All of those options would almost certainly increase costs by forcing the Navy and EDS to maintain quarantined legacy systems alongside N/MCI, he said.