Report bolsters limited NMCI testing

Additional testing of the Navy Marine Corps Intranet will not provide extra assurances and will have significant costs, according to a new report from the Center for Naval Analyses.

The report boosts the Navy's contention that NMCI should be allowed to use commercial testing procedures rather than treating the project as a weapons system, as Pentagon officials have argued. The latter would require a more onerous testing procedure.

"The most reasonable course of action at this point is to lift the strategic pause and proceed with the deployment of NMCI," according to the CNA report.

The testing decision has significant financial ramifications — potentially costing the Navy $728 million in fiscal 2002.

The decision about testing will determine whether the project can move beyond the congressionally mandated "strategic pause." Lawmakers stipulated that Defense Department officials sign off on the Navy's NMCI testing and certification. Linton Wells II, the Defense Department's acting chief information officer, would have to sign off on the decision to lift the strategic pause, and he has suggested that NMCI undergo the more rigorous weapons systems testing.

CNA's risk assessment of the NMCI strategic pause, requested by the chief of naval operations, warned that further delay in lifting the strategic pause will be increasingly costly and is not likely to produce significant benefits.

"The costs of delaying the NMCI deployment until later in [fiscal 2002] are substantial and increase with the time delayed," according to the report, "Preliminary Risk Assessment of the Navy Marine Corps Intranet Strategic Pause." The technical performance risks are low, and while the operational performance issues are less clear, they will remain unclear well into fiscal 2002.

"The NMCI contract was structured to shift the responsibility — and risk — of the cost and performance of NMCI from the [Navy] to a commercial contractor," the report states. Extending the strategic pause into fiscal 2002, however, has the unintended effect of transferring much of NMCI's risk back to the government.

The report says the Navy has four options:

* Continue with the strategic pause. That option would allow for full testing of NMCI, but the Navy would have to pay EDS $728 million in fiscal 2002. If the pause continues, some fraction of those funds will be wasted.

* Lift the strategic pause. There would be no additional cost or schedule risks beyond the risks inherent in the project itself, according to CNA. This option would not address the Pentagon's concerns about testing.

* Limit the strategic pause. NMCI could proceed to some degree while testing continues. The risks to NMCI's schedule depends on the size and timing of the second funding allocation, according to CNA.

* Terminate the NMCI contract. The cost of this option could be very high. EDS would be entitled to recover as much as $84.5 million in additional costs, and it is likely the vendor would seek to recover all of its costs, currently more than $1 billion. Furthermore, the Navy would face additional costs to rebuild its existing infrastructure.

CNA recommended lifting the strategic pause and letting the NMCI project proceed.