Study: NMCI worth the cost

The Navy's effort to create an enterprisewide network across its shore-based facilities will not save the service much money, but it will give it capabilities it would not otherwise have, according to a recent cost/benefit analysis of the Navy Marine Corps Intranet.

The analysis, conducted by Booz Allen Hamilton earlier this year, updates a July 2000 study by using actual costs, not estimates as in the July 2000 report. Navy officials said the latest analysis reaffirms the previous study's conclusion that NMCI has a sound business case.

"Each document has reaffirmed the fact that we made a good business decision," said Capt. Chris Christopher, NMCI's deputy director of plans, policy and oversight.

Lawmakers and the Office of Management and Budget requested the study, which focused on costs and used actual figures from the initial rollout of NMCI seats at seven sites, including the Naval Air Facility, located at Andrews Air Force Base, Md., and the Space and Naval Warfare Systems Center in San Diego.

Another ongoing cost/benefit analysis will provide additional data, Christopher said. The Booz Allen study was presented to the Navy April 26, but released publicly this month.

The study found that the average cost per seat before NMCI was about $3,545 per year. The cost of an average NMCI seat is $4,179. Although the NMCI cost is 18 percent more, "the price of an NMCI seat includes capabilities that are not available in the pre-NMCI environment," the study says, including compliance with Defense Department mandates such as records management, public-key infrastructure and security upgrades.

If the costs of those requirements were taken into account for the pre-NMCI environment, the seat cost would increase to at least $4,286, more than 2 percent more than the NMCI seat cost, the study concluded.

"The business case cannot be made without comparing pre-NMCI performance with NMCI performance," the analysis says. "The decision to undertake the NMCI initiative was not based only on cost. It focused on performance improvements that the [Navy] would not be able to provide though the traditional information technology acquisition approach."

Despite the initial rollout of seats, there remain many issues that are difficult to quantify, including project management risks, the study concluded. NMCI uses a seat management concept that the government does not have significant experience with, the study says, and managing these kinds of initiatives does not fit into the standard DOD acquisition program oversight format.

There are also risks because schedule delays have increased costs.

The study also states that the Navy's legacy applications "could have an impact on NMCI performance and schedule, although application security compliance is not fundamentally an NMCI issue." Many legacy applications do not meet DOD security criteria and therefore cannot be moved onto the NMCI network.

These are issues the Navy has been working to solve, Christopher said.

Cost/benefit analysis has become a significant part of agency decisions, said Warren Suss, president of Suss Consulting Inc. "More and more throughout the government, you see agencies making decisions and articulating their decisions based on cost/benefit analysis."

Often, it is difficult to create an accurate comparison and "quantify what you get from an improved infrastructure," he added.

The cost/benefit analysis reports will be used to measure performance improvements, said Dick Opp, director of the NMCI performance management division. "This is not just to prove what we did was a good idea. We use it as a tool."

***

What price NMCI?

For the initial implementation of Navy Marine Corps Intranet seats, the average fiscal 2001 cost per seat is $4,179, for 17,542 seats. That cost breaks down as follows.

Defense Information Systems Network wide-area network costs $342

(Includes additional cost to comply with Office of the Secretary of Defense policy)

Mandatory DISN costs $193

Government management oversight and program management office $68

Amortized government transition cost $32

NMCI contract costs $3,544

Included in NMCI contract costs are:

* Federal records management

* Security testing

* Defense Department public-key infrastructure/security upgrades

* Network Operating Centers

* Around-the-clock help desks

* Three-year refresh rate

* On-demand bandwidth

* Measurable performance

* Enterprise software upgrades