Navy awards extension to EDS for huge intranet project

The Navy has awarded systems integrators EDS a $3 billion extension of a contract to integrate some 1,000 individual networks scattered throughout the department, eWeek reports. The Navy Marine Corps Intranet has been a nasty kettle of fish for both the Navy and EDS, with huge cost overruns, lack of accountability, and squabbling over hundreds of millions of dollars in charges.

The contentious deal had resulted in legal wrangling between the two parties, which was settled with the extension signing as the government agreed to pay EDS $100 million to resolve the outsourcer's claims against it.

The deal has included a provision that the cost per user seat on the intranet decrease every year.

Signed in 2001, the original $7 billion contract for the world's largest intranet was set to expire in September, 2007; with the extension, it will continue until September, 2010, subject to the availability of funds.

That condition appears in the extension as well; over the additional three years, the cost of a seat is scheduled to drop 15 percent.

The original project, awarded in 2000, was $4.1 billion to connect 340,000 computers, but the contract was extended several times, and to date EDS has only connected about 300,000. The extension calls for the company to connect the remaining computers.

"This takes care of past history," said Rear Admiral James B. Godwin III, Program Executive Officer for Enterprise Information Systems—the top military officer overseeing the huge deal. "The new provisions will hold both the government and contractors accountable, with incentives and disincentives for good performance or lack of performance. We never had that before."

The agreement "allows both the Department of Navy and EDS to continue to move forward with positive momentum. We have worked very hard to ensure affordability of the NMCI seat price, as well as include new provisions in the contract on performance and schedule integrity," said Godwin.

Last year, the British Ministry of Defense awarded a consortium led by EDS a similar contract to maintain and host thousands of applications for use by 300,000 military personnel at 2,000 locations. The award was generally seen as a sign that EDS had fixed whatever problems had plagued the Navy Intranet project. And news in February that EDS had retained the lion’s share of GM’s IT service contracts further buoyed the impression that EDS is back.