CNET NEWS
http://news.cnet.com/news/0-1007-202-2766056.html
Services giants vie for $10 billion deal
By Melanie Austria Farmer
Staff Writer, CNET News.com
September 13, 2000, 8:40 a.m. PT
URL: http://news.cnet.com/news/0-1007-200-2766056.html
Four heavyweights in the professional services ring are vying for a
government defense contract worth an estimated $10 billion that could be
awarded as early as next week.
The bidders, which include services giants Computer Sciences (CSC),
Electronic Data Systems (EDS) and IBM Global Services and defense contractor
General Dynamics, have submitted their proposals and are anxiously awaiting
a decision from the U.S. Navy and Marines.
"We're just waiting for the phone to ring," said Tom Booth, a spokesman for
Falls Church, Va.-based General Dynamics. General Dynamics builds ships and
marine systems as well as land and sea combat systems.
The winning bidder will have little time to savor the victory: The Navy and
Marines hope to begin construction of a new intranet
system Oct. 1.
Analysts and contenders say the project, dubbed "Navy-Marines Corps
Intranet," or N/MCI, would mark the largest government
outsourcing contract ever awarded.
The N/MCI project would entail the development and maintenance of a
government intranet that would link about 100 existing
networks worldwide, according to Navy spokeswoman Jane Alexander. She added
that the contract will be awarded to one primary
contractor and will not be divided among the four bidders.
Historically in the information technology outsourcing world, government
contracts take longer to negotiate and are much more
complex than standard commercial contracts. Contenders for the N/MCI project
have been working for more than a year to win the
bid.
Last year, Connecticut nixed negotiations for an estimated $1.5 billion
outsourcing contract with Plano, Texas-based EDS to
privatize the state's computer systems. The closely watched deal was riddled
with challenges for both sides, such as tackling
complaints from an angry union, a long bureaucratic review and intense
public scrutiny. The job is now being completed through
smaller contracts with EDS and other companies.
Further complicating the contract award process is the death of Rep. Howard
Bateman, R-Va., who was chair of the House
Subcommittee on Military Readiness. Bateman's death may delay the Navy's
decision date by a few days, according to a source.
Before it can be passed, certain issues related to the N/MCI project still
need to be hammered out within the Defense Authorization
Bill. Bateman was part of the House-Senate conference committee on that
bill.
Though a winner has yet to be revealed, Merrill Lynch analyst Stephen
McClellan says CSC may have the inside track. In recent
research notes, McClellan said CSC has a "higher likelihood" of winning
because of its extensive experience and good track record
with federal outsourcing deals.
The El Segundo, Calif.-based company has landed several government
outsourcing contracts in recent months, including a 10-year
deal with the U.S. Army. If CSC wins the N/MCI project, McClellan noted that
it could boost his current forecast of 18 percent to 19
percent revenue growth for the company's fiscal year 2002.
Rivals EDS, IBM Global Services and General Dynamics also operate practices
devoted to the government sector.
Robert St. Jean, an analyst at J.P. Morgan, said he believes CSC and EDS are
the leading contenders. "Both have stronger
resumes in bidding on (government) deals," he said. "I'd be surprised if
either IBM Global or General Dynamics wins it.
"This will be a material event for whichever company wins the contract."
The Navy said the winning contractor will provide the computers, phones, fax
machines and anything else related to providing faster
voice, video and data communications.
Once the estimated five-year deal is completed, it will tie together some
360,000 Navy and Marine Corps personnel, giving them
desktop access to a common intranet and multiple databases.
Alexander said the new, single network will tie all the information from the
Navy and Marines together and will give people access to
human resources or personnel records from any location, even when a sailor
is on deployment.
Each bidder has selected a group of partners for its team. For instance,
EDS' partners on this effort include Raytheon and
WorldCom. The Navy is asking that 35 percent of the contract fee go to
small-business team members.
%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
|
