N/MCI: Buyers beware
- By Dan Verton
- Jul 24, 2000
Had the Navy opted to conduct a pilot of its proposed mega-intranet, users
at the Naval Air Systems Command would have been forced to pay more than 50 percent more per seat during the first year than the estimated average cost during the first year of the contract, according to a Navy report to Congress issued late last month.
In addition, under the Navy's current plan to award a services contract,
some commands could end up paying more for
information services than they currently do, the report concluded.
The Navy/Marine Corps Intranet is a multibillion-dollar program that
would replace a hodgepodge of two dozen Navy and Marine Corps networks
with a seamless network owned and operated by a single contractor.
In what Secretary of the Navy Richard Danzig called a "full-spectrum
report" on the benefits of N/MCI, the Navy
acknowledged that the Naval Air Systems Command (Navair), which would have
tested the intranet,
would have been "unfairly penalized because they pay nearly 50 percent more
per seat." The command would pay
$8,900 per seat compared to the average cost of $5,773 per seat for the
rest of the Navy. Sources said the Navy has since
rejected this option.
Likewise, other Navy units that have reduced costs for information technology
services through their own initiatives "may find that the seat cost of the
selected vendor is higher, and affordability will become an issue," the
Officials from the Navy and Navair could not be reached for comment.
The Navy delivered the report, along with a detailed business case analysis,
to Congress June 30 after lawmakers threatened to withhold money from the
program unless the Navy could prove that its plan complied with federal
regulations and made fiscal sense.
However, rather than conduct a pilot project before awarding a contract,
as some experts suggested, the Navy plans to use the first year of the five-year
contract as its test case for base- and local-area network services and
desktop services. Wide- and metropolitan-area network services will not
be included in the pilot.
The first year also will not include voice services. The Navy has delayed
voice services until late in fiscal 2002 or early 2003 "to keep pace with
industry's transition of quality voice over Internet protocol," according
to the Navy study.
Therefore, the 27,000 users at Navair will share the $2.42 million first-year
price tag — or 5.5 percent of the $4.4 billion yet-to-be-funded, first-year
requirement for the entire 485,000 users envisioned under the intranet contract.
The per-seat cost is high during the first year because the winning vendor
will not be able to spread the fixed costs of the contract across the five-year
life of the deal, the Navy concluded. Without a pilot, it would be impossible
to fund the shortfall and "would effectively delay" the N/MCI contract until
fiscal 2002, the report states.
Olga Grkavac, executive vice president of the Information Technology
Association of America's Enterprise Solutions Division, said there is nothing
magical about what the Navy plans under N/MCI. "This is not experimental
in terms of the private sector," she said. "All four of the primes have
done this. The only people it's new to is the Navy."