EDS wins Navy intranet deal

The Navy today awarded Electronic Data Systems Corp. the $7 billion Navy/Marine Corps Intranet contract, the crown jewel of federal information technology programs.

N/MCI is designed to replace a hodgepodge of Navy and Marine Corps networks with a seamless network owned and operated by the commercial sector.

"This is a pivotal moment in the Department of Defense. This is the most revolutionary idea so far in re-engineering how we do business," said Arthur Money, the Pentagon's chief information officer.

Military officials and analysts say it is the largest government IT contract ever awarded. The single network will be used for passing and accessing information of all kinds, whether needed for ordering supplies, informing commanders of battlefield conditions or allowing individual sailors to access their medical records.

Rudy de Leon, deputy secretary of Defense, also praised the Navy program.

"The Navy/Marine Corps Intranet will revolutionize the way that we look at the process of sharing information," de Leon said. "It gets the government out of the business of owning and operating information technology systems and instead transfers that function to a fee-for-service contract with private industry. The potential for increased efficiency, standardization, interoperability and better business processes is tremendous."

The Navy tagged a second company to act as backup in case EDS falters or cannot meet program requirements. EDS had the lowest bid — nearly $7 billion — for a contract that had been estimated to be worth as much as $16 billion.

Other bidders included Computer Sciences Corp., IBM Corp. and General Dynamics Corp.

Navy and Pentagon officials acknowledged in a press briefing today that the program has seen many hurdles and will encounter many more challenges in the future. One analyst said the program so far has "had more twists and turns than a [John] Grisham novel."

Many of those twists and turns centered on Congress, with some members having faulted the Navy for lack of accurate cost information. In recent weeks, lawmakers forced the service to delay announcing the contract winner while seeking answers to questions about how Navy depots might be affected.

Navy Secretary Richard Danzig reported that the service has ironed out all issues with Congress. He added that today's announcement is a major milestone for the program but that in many ways it is the beginning of the journey, not the end.

Danzig and other military officials lauded the Navy's ability to launch the program in 18 months, a very short time in DOD terms, despite the many technical, political and budgetary obstacles strewn in its course.

Danzig said the Navy's current IT budget is about $1.6 billion and that the service will pay for N/MCI by no longer allowing organizations within the two services to build their own disparate networks.