CSC, NSA get down to business

For Computer Sciences Corp., winning the National Security Agency's multibillion-dollar Groundbreaker contract may have been the easy part. Now, as the company and the intelligence agency move forward, details such as the contract's potential value are causing headaches on both sides.

NSA is sticking to its "in excess of $2 billion" phrase used July 31 when the agency announced the contract winner. CSC, faced with a financial earnings report Aug. 2, issued a press release July 30 touting a potential payoff of $5 billion or more across the 10-year contract — a figure the agency has used since the request for proposals was released in March.

"With its current scope, the potential value of the contract exceeds $2 billion over a 10-year period if all options are exercised," Van Honeycutt, CSC's chairman and chief executive officer, said in a written statement. "If the scope is expanded, as anticipated, the potential value of the contract could exceed $5 billion." NSA, in response to written questions, admitted that "future additional requirements may add to the contract price," but an agency source close to the process insisted, "With options exercised, the contract is close to $2 billion. You'll have to ask CSC why they're saying $5 billion."

It is no secret that the agency may extend Groundbreaker beyond its headquarters in the Washington, D.C., area. Harry Gatanas, NSA's senior acquisition executive, said earlier this year that the agency might expand Groundbreaker to make it a "global effort." An agency spokeswoman confirmed that possibility Aug. 2.

"We anticipate reviewing global requirements in the near future. Some of the requirements may be satisfied by Groundbreaker," the spokeswoman said.

Kenneth Israel, former director of the Pentagon's Defense Airborne Reconnaissance Office, had a different take on the contract's scope and value.

"The contract is $2 billion, and if anyone says different, they're blowing smoke," said Israel, who is now senior vice president of Air Force programs at Burdeshaw Associates Ltd. He also said that if NSA does expand Groundbreaker, the agency would likely reopen the contract to competition.

NSA has a reason for sticking to its figure, said John Pescatore, a former NSA analyst and now an information security analyst with consulting firm Gartner Inc.

"They don't want to appear locked into a large commitment this early," he said. "It is a sensitive subject at NSA." It may be a sensitive issue on Capitol Hill as well, where lawmakers have been skeptical of large, expensive information technology contracts that often displace federal workers and small businesses in their districts. Groundbreaker is expected to help NSA acquire more supercomputing power than perhaps any organization in the world, as well as regain its technological edge. It is being touted as a major acquisition reform effort, one that rivals the $6.9 billion Navy Marine Corps Intranet contract.

"This Groundbreaker procurement, along with other major programs, is a reflection that we have the talented people, disciplined process and corporate will to smartly modernize the National Security Agency through a transformation of the buying process," Gatanas said.

And it may break ground for other agencies as well.

"We believe this is the beginning of a number of these major opportunities because it makes business sense both for industry and for the government. We think there's a trend building here," said Tom Robinson, president of CSC's federal-sector defense group.

CSC went into the competition as the heavy favorite, competing against teams led by AT&T and OAO Corp. But it was also considered the favorite for NMCI, which the Navy awarded to Electronic Data Systems Corp.

Industry experts say that loss dampened CSC's outsourcing business image. Groundbreaker "was a critical win to re-establish themselves as a winner in this market," said Tom Meagher, vice president of equity research at BB&T Capital Markets. "If [CSC] had lost, it would have been the second major contract in a row where they were the clear front-runners, and it would have been a psychological blow."