Navy preps NMCI contingencies

EDS has not approached the Navy seeking to renegotiate the $6.9 billion Navy Marine Corps Intranet contract, the director of the program said, despite published reports that suggested EDS was interested in getting more money for the contract.

But the Navy has been honing its contingency plans in the event that EDS, the information technology services giant, should be unable to carry out the contract.

NMCI seeks to create a single network across the Navy's 300 shore-based sites.

EDS has been under intense scrutiny on Wall Street. Analysts have suggested that the company faces a cash crunch in part because of the delays in rolling out NMCI.

Rear Adm. Charles Munns, NMCI director, said that EDS' problems are a concern for Navy officials. EDS, after all, will own and operate the Navy's shore-based IT infrastructure. But given the state of the economy among high-tech companies, he said he is pleased that the Navy is working with a big company that will likely weather the storm.

Even in a worst-case scenario, it is unlikely that services would be disrupted. The recent bankruptcy filing by WorldCom Inc. has not impacted NMCI operations, he noted. WorldCom backs up the Defense Information Systems Agency for NMCI's wide-area network.

Despite those assurances, NMCI officials have re-examined their contingency plans in the event EDS should have problems, Munns said. The top priority is keeping the network operational, he said. And the Navy has some experience running a network — the service operates the shore-based network, IT-21.

EDS has not approached the Navy about renegotiating the contract, Munns said this week at the Military Communications conference in Anaheim, Calif.

Last week, the London-based Financial Times reported that EDS is looking to renegotiate the NMCI contract. The newspaper quoted EDS Chief Financial Officer Jim Daley as saying that there was a "possibility" that the company would seek to renegotiate the Navy contract to deal with the "significant buildup in unbilled receivables at the company."

There have been no such talks, Munns said.

EDS spokesman John Clendening noted that the company's financials are strong.

"We have all the resources we need to serve our existing clients and pursue new business," Clendening said, nothing that overall, the company "generates ample cash flow from operations."

Wall Street analysts, however, have been concerned about EDS' cash flow given contracts, such as NMCI, for which EDS does the work now and gets paid later.

About the Author

Christopher J. Dorobek is the co-anchor of Federal News Radio’s afternoon drive program, The Daily Debrief with Chris Dorobek and Amy Morris, and the founder, publisher and editor of the DorobekInsider.com, a leading blog for the Federal IT community.

Dorobek joined Federal News Radio in 2008 with 16 years of experience covering government issues with an emphasis on government information technology. Prior to joining Federal News Radio, Dorobek was editor-in-chief of Federal Computer Week, the leading news magazine for government IT decision-makers and the flagship of the 1105 Government Information Group portfolio of publications. As editor-in-chief, Dorobek served as a member of the senior leadership team at 1105 Government Information Group, providing daily editorial direction and management for FCW magazine, FCW.com, Government Health IT and its other editorial products.

Dorobek joined FCW in 2001 as a senior reporter and assumed increasing responsibilities, becoming managing editor and executive editor before being named editor-in-chief in 2006. Prior to joining FCW, Dorobek was a technology reporter at PlanetGov.com, one of the first online community centers for current and former government employees. He also spent five years at Government Computer News, another leading industry publication, covering a variety of federal IT-related issues.

Dorobek is a frequent speaker on issues involving the government IT industry, and has appeared as a frequent contributor to NewsChannel 8’s Federal News Today program. He began his career as a reporter at the Foster’s Daily Democrat, a daily newspaper in Dover, N.H. He is a graduate of the University of Southern California. He lives in Washington, DC.


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