NGEN's risky choices

With the Navy's landmark Next Generation Enterprise Network contract finally awarded, those in government IT will be watching carefully as the next steps unfold.

NGEN's predecessor, the Navy-Marine Corps Intranet, is the largest computer network in the world other than the public Internet. NGEN, which will be run by a team led by Hewlett-Packard and will serve 800,000 users, marks a new path in a number of aspects as a major IT contract awarded in a shifting fiscal environment.

The contract was awarded based on "lowest price technically acceptable," a controversial measure that some critics suggest rules out options that offer better services for higher costs. In addition, the multi-phased approach to the project and the intense spending scrutiny raise questions.

The LPTA trend is gaining momentum as agencies look for savings everywhere possible, and NGEN program managers reported significant savings through the approach. According to officials, it is part of the reason the contract's maximum value is roughly $3.5 billion, as opposed to speculative figures as high as $10 billion that some had expected.

"This contract is achieving greater than $1 billion savings for the Navy, and in this fiscal environment that's as critical as it gets," Sean Stackley, assistant secretary of the Navy for research, development and acquisition, said in a conference call with reporters on June 27.

Stackley said that officials used previous NMCI budgets as a baseline, extrapolating costs over future years to the 2014 budget and using those figures as a comparison. "So in fact we actually reduced our budget based on anticipated savings from this contract award; and then with the award itself, we get to harvest additional savings," he said.

On the flip side, some fear that the decision could mean trouble later on. Navy officials insist that the thorough approach to its requests for proposals – which were revisited a number of times throughout the process amid ongoing discussions between government and industry – will mitigate issues that could require changes to the contract or scope. However, others say such changes are likely.

"Unfortunately what often happens subsequent to the award is that the government realizes that it has not explicitly defined all the requirements in the document, which leads to the need for modifications, negotiations and often creates ongoing problems," said Warren Suss, president of Suss Consulting. He acknowledged that the Navy put significant work into providing detailed requirements information, but nonetheless, "I would not be surprised to see a great deal of back and forth between the government and HP on this deal."

Another concern is the incorporation of new and emerging technologies throughout the relatively short length of the contract – five years if all options are extended. One source said that under the contract, the process of making the transition from NMCI to NGEN is much clearer than the transformation that should come after that.

"A big question mark is, how will the government handle transformation, how will they handle the shift to the next-environment involving wireless?" Suss said. "How will they handle transition to the cloud environment, and how will the government handle the need for next-generation identification and authentication?"

Navy officials seemed to dismiss the notion that five years is too short of a window, and said that the length of time that went into preparing NMCI for transition and the NGEN contract itself – several years – means that future transitions will be shorter and easier.

"The big difference...is knowing what the network is. There were [years] as part of that [request for proposal] development that the government had to figure out exactly what it had," said Victor Gavin, program executive officer-enterprise information systems. Now that there is a better understanding of what assets are part of the program, "we're at a much better position not only to shorten that period but to actually make the next competition at a much faster pace," he said.

Still, the short timeline creates new challenges, particularly with such a big and expensive project, analysts noted. Moreover, it could push contractors to question how much to invest in enhancing capabilities and upgrades for a relatively brief contract period.

Those and other issues are symptomatic of a larger issue: the intense focus on costs rather than the product and impact.

"When you're really just trying to focus on how much you're spending on IT versus what kind of productivity and mission effectiveness you're making, you end up getting what you pay for," Suss noted.

And it is not just the Navy or even the Defense Department this conundrum affects. With budgets squeezed throughout the government, it is a much broader issue.

"This applies across the board. Instead of looking at it as the government equivalent of a profit center, a way to do better in the mission...you're focusing on actual dollars spent, and as a result, you tend to limit investments that could generate greater efficiencies and effectiveness," Suss said. "It's kind of overlooking the force-multiplier potential for IT investment, and this is just one manifestation of the problem across government. It takes a brave executive to stand up to cost measures and see IT as an investment and force multiplier, rather than just [being] cost-centered where the job is to squeeze the last dollar out of your investment."