Navy defends intranet deal

The Navy last week erected a defensive perimeter around its Navy/Marine

Corps Intranet proposal in an effort to fend off growing congressional resistance

to a contract that could cost the service as much as $16 billion.

In a calculated move designed to allay concerns on Capitol Hill that

the service is moving full steam ahead on a program for which it has budgeted

no money, Navy officials on March 8 delivered to Congress a "memorandum

of agreement" and a letter from the Navy's secretary, Richard Danzig. Both

documents promised full disclosure of the Navy's business approach to outsourcing

the entire baseline of Navy information technology services.

The memo, which was signed by Paul Brubaker, the Defense Department's

acting deputy chief information officer, and Ron Turner, the Navy's deputy CIO for infrastructure, systems and technology, promises to deliver to Congress certification of N/MCI's

compliance with the Clinger-Cohen Act before a contract is awarded.

Rep. Herbert H. Bateman (R-Va.), chairman of the House Military Readiness

subcommittee and one of the most vocal detractors of the Navy's approach

to the intranet deal, said he is "very concerned about the emergence of

what may be a $16 billion program over a short period of years." However,

the memorandum, Bateman said, "does much to satisfy my concerns."

A N/MCI program office spokesperson said the cost of the program remains

at $10 billion but that Congress may be including option years in its calculation.

Congress is concerned with N/MCI because the Navy has not requested

any new money for the program in its fiscal 2001 budget request and until

now has all but ignored Congress' oversight role. The Navy has argued that

the program will be funded through the existing IT budgets of local commands

and that there is no need to identify new money.

An industry source, who spoke on condition of anonymity, called the

flap over N/MCI "a sin of omission" by the Navy. "The Navy assumed that

because they had not requested any additional money that they didn't have

to keep Congress in the loop," the source said.

The House Armed Services Committee disagreed with the Navy's approach

in a March 7 memo, stating that a "contract of this magnitude constitutes

a major acquisition [and]...all budgeting guidelines must be followed."

At a March 8 joint subcommittee hearing, Bateman asked, "Where does

the Department of the Navy contemplate obtaining the money if it goes forward

[with N/MCI]?" Bateman also said he wants the Navy to assure Congress that

at a time when military readiness is being strained, the N/MCI program will

not siphon funds from other programs.

In his personal appeal to Bateman, Danzig explained that the cost of

N/MCI is substantial "in large measure because existing [Navy] expenditures

for IT infrastructure and services are already substantial." While the plan

is to use existing resources to fund N/MCI, Danzig assured Bateman that

a detailed financial analysis of N/MCI is being prepared.

"Should any reprogramming or realignments be needed," Danzig wrote,

"they will be identified and I will ensure that you are kept fully apprised."

A Navy software developer who spoke on background said the idea that

the Navy will not need any new money for N/MCI sounds far-fetched. "Our

region is short almost $2 million of operating money this year, and we don't

expect to get any more operating money next year," the source said.

Rick Rosenberg, chief operating officer for Electronic Data Systems

Corp.'s Federal Government Unit, one of the vendors bidding on the contract,

said the Navy and Congress are coming to terms with the procurement and

are getting more comfortable with it. "The dialogue has started, and it's

a good dialogue," Rosenberg said.

"The way the DOD is funding this is the way corporations do it every

day," another industry source said. "It's a new model for the Hill and it

doesn't necessarily require oversight," the source said. "They're just not

used to it."


Copy of the March 8 letter from Navy Secretary RichardDanzig to Rep. Herbert Bateman (PDF)

Copy of the Navy's March 8 Memorandum of Agreement about the N/MCI (PDF)

BY Dan Verton
Mar. 13, 2000

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