Navy favors outsourcing IT smorgasbord

HONOLULU - The Navy plans to conduct a pilot information technology outsourcing program in the Pacific Fleet that could lead to a whole new way the service acquires computer and communications products and services used on shore and at sea.

Marvin Langston deputy assistant secretary for command control communications computers and intelligence (C4I) electronic warfare and space programs and acting chief information officer of the Navy said the pilot will test outsourcing as a more efficient and cost-effective means of acquiring what he called "commodity electronics" and the services required to support them. Outsourcing in turn would free up needed capital funds for warfighting functions Langston said.

These commodities include all the essential commercial pieces of the Navy's IT infrastructure including PCs local-area networks wide-area networks and their constituent parts such as hubs and routers. The outsourcing program would not include Navy-unique requirements such as rugged or rack-mounted computers Langston said.

The Navy needs to find a new more creative way to acquire IT resources and services Langston said calling the service's computer procurement practices "anarchy."

If the Navy implements the outsourcing servicewide it could create billions of dollars in revenue for industry as well as substantial savings for the Navy industry sources said.

Langston speaking at an industry/Navy round table on outsourcing at the annual Armed Forces Communications and Electronics Association's Asia-Pacific Conference said the broad philosophy behind the outsourcing pilot was simple: "Allow industry to capitalize on [existing Navy IT assets] and then lease it back to us."

Langston who said he held the round table to gather information on the correct approach to take with the pilot said he would like to see a program that provided users with a variety of hardware and services ranging from an IT "spigot on the wall" to computers that deliver varying levels of performance.

The Navy has not established the "boundaries" of the Pacific Fleet pilot but Langston said it would include units ashore and afloat including carrier battle groups and/or amphibious ready groups. He also did not provide a timetable for a Navywide outsourcing program industry sources predicted the Navy would take an evolutionary rather than revolutionary tack.

Services the Navy would like to acquire through outsourcing include network operations and maintenance functions currently handled by Naval Computer and Telecommunications Centers worldwide. But Langston said he did not envision the Navy taking a completely hands-off approach to those centers. Rather they would be staffed by contractors and service personnel.

The Navy has a massive base telecommunications contract on the street the $1.5 billion Voice Video and Data (Vivid) procurement to modernize 100 bases worldwide. Sources said Vivid includes outsourcing options. Asked how the procurement fits into the outsourcing project Langston said that if it existed today "I would use it for the pilot programs." AT&T Bell Atlantic Corp. GTE Corp. and Lucent Technologies Inc. are expected to be bidders.

Langston indicated that he wants more options than those offered by Vivid which does not cover computers. He cited the Defense Information Systems Agency's Defense Enterprise Integration Services II contract as a likely model saying he would like to end up eventually with a contract or contracts with 10 to 15 vendors the Navy could choose from for specific tasks. The Navy could use DEIS II to help with the pilot programs.

The new outsourcing contracts if the Navy proceeds fleetwide would overlap the 10-year Vivid contract Langston said. Depending on their success and use they "could overwhelm Vivid" or be overwhelmed by it.

Commenting on the service's plan Valerie Wallick the Navy's deputy chief information officer said the service would outsource all the infrastructure at selected pilot sites including "everything from the [Defense Information Systems Network] point-of-presence to the desktop." She said the Navy would formally announce three or four pilot projects the first week of December in the Commerce Business Daily."We've come lately to the idea of outsourcing " Wallick said last week at a conference sponsored by the Federation of Government Information Processing Councils. "The Navy is really getting on board with this because the shore infrastructure is in great need of modernization. So we are looking at a number of pilot projects in the next few years."

Industry particularly outsourcing vendors hailed Langston's plans. Joe Draham vice president of market development for Electronic Data Systems Corp. said outsourcing IT would free up billions in Navy IT capital costs "that could go into increasing combat capabilities.... It would free up the pressure on modernization dollars for the fleet."

EDS could provide the Navy with a turnkey management package "down to the desktop PC " Draham said. Langston said he did not envision the Navy pursuing such a total outsourcing solution but rather a "partnering" relationship in which the service and contractors shared responsibilities.

Draham added that industry would only consider handling the Navy's IT business on an outsourcing basis if "we can capitalize our costs.... In other words we're going to have to borrow internally or externally and to do this the Navy [will need to pay a fee] that covers our interest costs."

Terry Sheckinger group director of business development for Navy programs at Computer Sciences Corp. said the Navy could save at least 20 percent of its IT budget pegged at $2 billion for fiscal 1997. Such savings "amount to real money."

Sheckinger added that outsourcing would enable the service to manage technology refreshment and upgrades more efficiently and inexpensively with contractors assuming the up-front capital costs for the new gear. Industry sources said Langston's plan is not likely to run afoul of legislation restricting outsourcing at DOD. One source said: "The legislation against outsourcing is aimed at data processing megacenters and depot maintenance facilities both of which have large constituencies. Langston's plan does not affect that large a constituency." The source added that "when the Hill hears about this they probably will endorse it because it will allow the Navy to better use its capital and personnel resources for the warfighting mission."

Warren Suss a telecommunications analyst called the outsourcing program a good idea but said any enthusiasm should be tempered by the Navy's series of aborted efforts to modernize its base-level communications infrastructure. Vivid Suss said is "their third attempt to do a base telecom upgrade and this outsourcing program would make the fourth.... They have failed to come up with a well-defined strategy for more than a decade."