Navy intranet contractor receives three-year extension

The Navy last week signed a $3.1 billion, three-year extension of Electronic Data Systems' contract to build the Navy Marine Corps Intranet, despite a recent drop in user satisfaction and a security breach.

EDS, the Plano, Texas-based contractor that won what was originally a $4.1 billion, five-year NMCI contract in October 2000, said the extension solidifies the company's relationship with the Navy and will allow the project to move forward.

In October 2002, the Navy lengthened the original contract, with its value increasing to $6 billion. The agreement would have run out in September 2007 without the latest extension.

The modification exercises an option to extend the massive information technology contract from September 2007 to September 2010. It is contingent on the appropriation of adequate funds by Congress.

According to the Navy, the modified contract includes improved terms for the transition once EDS' work is finished. For example, it alters the value of the equipment and infrastructure when the Navy buys the system back after the contract expires. It also includes new and more defined financial incentives for the contractor to stick to an updated schedule.

Delores Etter, assistant secretary of the Navy for research, development and acquisition, said in a statement she decided to exercise the option for an extension after a close study of the contract, in agreement with Rear Adm. James Godwin, NMCI's program manager.

"NMCI has become a vital part of our day-to-day naval operations, and I felt it critically important that we not lose connectivity for our users," Etter said.

Godwin said the agreement allows EDS and the Navy to move forward with "positive momentum" and "affordability, performance, schedule and security are the reasons this is the right choice to make."

Despite a system security breach in October 2005 that required the resetting of some passwords as a precautionary measure, NMCI reports to have improved the Navy's overall IT security, blocking 20 million unauthorized access attempts in 2005 and quarantining 70,000 viruses.

But the most recent quarterly customer satisfaction rating for NMCI showed a four-point drop from 78 percent in September 2005 to 74 percent in December of that year. None of the military organizations that use NMCI rated it above the 85 percent target point at which EDS is eligible to receive incentive payments for the quarter based on the number of users.

For the first time, the 19,804 surveys that were completed -- out of 141,291 distributed -- asked users to indicate the top item that could improve satisfaction. More than half of the respondents said they would like to see performance improvements and the elimination of e-mail size restrictions.