Navy taps IDP for PC, notebook leasing pact

In a prototype procurement program that eventually could change the way it purchases information technology, the Navy Atlantic Fleet last month awarded International Data Products Corp. a five-year, multimillion-dollar contract for leasing computers, peripherals and networking equipment.

The IT-21 Leasing contract is part of the Navy's Information Technology for the 21st Century (IT-21) initiative, which uses standard PCs and other off-the-shelf technology to offer a fully interoperable computing environment on ships and ashore.

As part of the initiative, the Navy is trying out monthly payments for leased equipment rather than paying the full cost up front and owning it. This new approach will allow Navy IT users to exchange their equipment for more advanced technology under the same leasing agreement rather than buying all new equipment. If leasing proves to be a viable solution, the fleet may look at expanding its use, the Navy said.

"We will consider our contract successful based upon the quality of IDP's performance, support and responsiveness to our requirements," said Dorothy Hennigan, director of the Command, Control, Communications and Computers Resources Management Division for the commander in chief of the Atlantic Fleet.

"The primary goal of this lease is to provide regularly scheduled technical updates to our users," Hennigan said. "This program must provide them with the most up-to-date equipment to help them excel at their jobs and to increase their job satisfaction."

The ultimate value of this contract depends on the mix of equipment the Navy leases, Hennigan said.

According to IDP, the Navy's payments during the first year will amount to about $2 million under the current terms of the contract. However, the Navy has the option to increase or decrease the original volume by either 25 percent or 50 percent, depending on the type of equipment.

Under the IT-21 Leasing contract, which has one base year and four option years, the Navy initially ordered 1,000 desktop computers, 200 laptop computers and 25 rack-mountable servers. All computers are intended to run Microsoft Corp.'s Windows NT operating system, office automation and related software, which the Navy is providing under a separate contract.

The Navy also ordered more than 600 printers, manufactured by Lexmark International Inc. and Hewlett-Packard Co., nine Asynchronous Transfer Mode uplink modules and nine Fast Ethernet switch modules, all manufactured by Cabletron Systems Inc.

The Navy can require IDP to refresh the contract with more up-to-date configurations after two years for servers and networking equipment and after 18 months for other equipment.

However, IDP will not be able to increase its monthly lease unit price as part of these refreshes. The Navy also has the right to terminate the contract with 30 days' notice.

The potential of termination represents the biggest risk to IDP, said Carlos Obando, IDP's director of new business development. However, "we do not feel it will be a problem," he said.

Leveraging an Investment

Leasing can help government chief information officers leverage their investment in IT, said Bob Dornan, senior vice president of Federal Sources Inc. But leasing deals also can be risky for a company because it has to secure financing, and the economics of the lease agreement have to be just right to ensure that the equipment does not wind up back in its lap, Dornan said.

"I don't think the government has been a good risk lately," he said. "They seem to change their minds almost daily about what they want to do and whom they want to do it with."

The Navy is paying $123 a month for the IDP midtower desktop, which comes with an Intel Corp. Pentium II 233 MHz chip, 64M of memory, a removable 3.1G hard disk drive, a 24X CD-ROM and a 17-inch monitor.

The IDP notebook computer, which costs $147 a month, includes an Intel Pentium 166 MHz chip, a 2.1G removable hard drive, a 3.5-inch floppy disk drive, a 20X CD-ROM and a 12.1-inch display. The desktop and notebook configurations can be refreshed after 18 months.

The rack-mountable server, which is made by Advanced Logic Research Inc., comes with four Intel Pentium Pro processors, six 9.1G hard disk drives, a 16X CD-ROM drive and a tape backup unit, and the system will cost the Navy $1,147 per month. The Navy can refresh the server configuration after two years.

- Margret Johnston contributed to this article.

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