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Shipyards, depots unable to calculate cost of Navy intranet

Shipyards and air depots are having a hard time estimating the cost of implementing the Navy's multibillion dollar intranet, according to a new General Accounting Office report.

Officials have not decided who will pay for various transitional costs, and "as a result, the shipyards' and depots' ability to effectively plan and budget is being impaired," the report said (GAO-03-33). GAO based its study on conversations with officials at six capital-funded facilities from March to August. Capital-funded means that the facilities recover their costs through fees charged to customers.

The Navy-Marine Corps Intranet (NMCI) is a massive project designed to increase and streamline information sharing among the roughly 300 Navy and Marine Corps bases in the United States, Puerto Rico, Cuba, Guam, Iceland and Japan. The internal network is also intended to protect sensitive information from cyberattacks.

In October 2000, Electronic Data Systems Corp. (EDS) won a five-year contract to provide technology, maintenance and help desk support for more than 400,000 Navy desktops and 200 networks. But the project is running at least a year behind schedule because of delays in the testing phase and a failure to identify tens of thousands of existing legacy applications.

On Oct. 29, President Bush signed a bill allowing the Navy to extend the five-year, NMCI contract up to seven years, the cutoff point mandated in H.R. 5647, a bill introduced by Rep. Tom Davis, R-Va.

To date, EDS has assumed responsibility for connecting more than 95,000 workstations to the intranet. About 35,000 of those are already hooked up to the system. Project managers are hoping to implement the full intranet by the end of calendar year 2003, according to Navy Capt. Chris Christopher, NMCI's staff director.

Officials planned on linking more than 20,000 workstations at shipyards and air depots to the intranet by the end of fiscal 2002, but they are now predicting this will not be done before the latter part of fiscal 2003.

Because of the delay, NMCI did not have an impact on IT costs at shipyards and air depots, or the rates they charge customers, in fiscal 2002, GAO said. The shipyards and depots provide construction, overhaul, repair and maintenance services to the Navy fleet. Transition issues, such as site readiness and preparation, had a minimal impact on costs, which could not be quantified because NMCI expenditures were lumped together with other items in the IT budgets of shipyards and depots.

The report estimates that about 38 percent of the $106 million fiscal year 2003 IT budget at shipyards will go toward NMCI, while roughly 31 percent of the $102 million IT budget at air depots will be used on the project. Shipyard and air depot officials told GAO that these costs should not change the rates they charge customers in fiscal 2003. The facilities plan on offsetting NCMI expenses by reducing overhead costs, including spending for travel, training and property maintenance.

But it's hard to predict NMCI's economic impact on shipyards and air depots after fiscal 2003 because it is unclear who is responsible for paying for certain transition items. For instance, shipyards do not know whether they will incur costs for arranging for NMCI workstations to accompany personnel as they change locations.

Navy officials should establish a "department-wide means for systematically capturing and resolving NMCI issues that affect the ability of shipyards and air depots to plan and budget," the report recommended. The Defense Department agreed with GAO's findings, but the report prompted an argument over whether NCMI program officials or the central shipyard and depot commands should take responsibility for implementing the recommendations.