NMCI slowdown causes layoffs

Electronic Data Systems Corp. has laid off 10 percent of the staff working on the Navy Marine Corps Intranet contract following a lengthy debate between Navy and Defense Department officials over how thoroughly the system should be tested.

The NMCI Information Strike Force —a conglomeration of NMCI contractors led by EDS —has cut about 300 jobs, EDS spokesman Chris Grey said. The layoffs, which officials expect will only be temporary, affect both EDS and its subcontractors.

The job cuts come in the wake of discussions between Navy and Pentagon officials over how rigid the testing schedule should be. Those discussions resulted in an agreement signed this month to reduce the number of seats EDS can roll out in coming months. EDS currently controls about 42,000 seats of the Navy's approximately 360,000 seats.

The agreement seeks to move the $6.9 billion effort to outsource the Navy and Marine Corps network infrastructure toward a timetable driven by specific events, said Ron Turner, the Navy's deputy chief information officer. For example, the next significant milestone comes this winter, when EDS will complete a customer test and evaluation at NMCI's first four sites. Once DOD reviews those tests, the Navy will be able to roll out an additional 100,000 seats, Turner said.

Because of the shift, the agreement can now extend through the life of the NMCI contract, said Bill Curtis, director of the DOD CIO's investment and acquisition directorate. The NMCI contract has built-in incentives that push the Navy and EDS to advance as quickly as possible, he said. The agreement enables DOD to review the tests of that system —including some independent reviews —as the work proceeds.

"It's all very logically linked," Turner said.

The layoffs were spurred largely by the fact that the legislation giving the Navy the go-ahead for NMCI also included a Sept. 30 deadline for the Pentagon to assess the program and determine its future. Under the new agreement, that determination will not take place until sometime this winter.

"I'm confident we now have an agreement we can work with," Curtis said.

The cuts are seen as a short-term measure. "Those staffing levels were appropriate to meet the original rollout schedule," Grey said. The NMCI Information Strike Force plans to increase staffing in the near future once NMCI clears this winter's milestone, he added.

Grey said EDS has tried to reassign the affected people elsewhere within the company and has asked subcontractors to do the same where possible.

The cuts were determined before the Sept. 11 terrorist attack on the Pentagon, Grey noted. The work needed to repair the Pentagon could shrink the number of people laid off, although EDS officials did not know to what extent.

Lawmakers still must approve the testing agreement.