Navy preps NMCI contingencies

EDS has not approached the Navy seeking to renegotiate the $6.9 billion Navy Marine Corps Intranet contract, the director of the program said, despite published reports that suggested EDS was interested in getting more money for the contract.

But the Navy has been honing its contingency plans in the event that EDS, the information technology services giant, should be unable to carry out the contract.

NMCI seeks to create a single network across the Navy's 300 shore-based sites.

EDS has been under intense scrutiny on Wall Street. Analysts have suggested that the company faces a cash crunch in part because of the delays in rolling out NMCI.

Rear Adm. Charles Munns, NMCI director, said that EDS' problems are a concern for Navy officials. EDS, after all, will own and operate the Navy's shore-based IT infrastructure. But given the state of the economy among high-tech companies, he said he is pleased that the Navy is working with a big company that will likely weather the storm.

Even in a worst-case scenario, it is unlikely that services would be disrupted. The recent bankruptcy filing by WorldCom Inc. has not impacted NMCI operations, he noted. WorldCom backs up the Defense Information Systems Agency for NMCI's wide-area network.

Despite those assurances, NMCI officials have re-examined their contingency plans in the event EDS should have problems, Munns said. The top priority is keeping the network operational, he said. And the Navy has some experience running a network — the service operates the shore-based network, IT-21.

EDS has not approached the Navy about renegotiating the contract, Munns said this week at the Military Communications conference in Anaheim, Calif.

Last week, the London-based Financial Times reported that EDS is looking to renegotiate the NMCI contract. The newspaper quoted EDS Chief Financial Officer Jim Daley as saying that there was a "possibility" that the company would seek to renegotiate the Navy contract to deal with the "significant buildup in unbilled receivables at the company."

There have been no such talks, Munns said.

EDS spokesman John Clendening noted that the company's financials are strong.

"We have all the resources we need to serve our existing clients and pursue new business," Clendening said, nothing that overall, the company "generates ample cash flow from operations."

Wall Street analysts, however, have been concerned about EDS' cash flow given contracts, such as NMCI, for which EDS does the work now and gets paid later.