N/MCI: Buyers beware

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

study concluded.

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."