Navy picks HP as winner of $3.5B NGEN contract

The Navy has picked Hewlett-Packard as the prime contractor on its Next Generation Enterprise Network contract worth $3.5 billion over five years.

HP Enterprise Services is the incumbent contractor on the Navy-Marine Corps Intranet, which NGEN replaces, but Navy officials emphasized that incumbency was not an advantage.

“This is a different HP team than NMCI,” said  Sean J. Stackley, Assistant Secretary of the Navy for Research, Development & Acquisition. “HP reshaped itself for NGEN.”

In fact, the team competing against HP for NGEN was co-led by Harris Corp., which has a role on the HP NMCI team.

NGEN is a services contract that will now help the Navy and Marine Corps manage and operate its IT infrastructure network. Unlike under NMCI, the network is now government-owned and operated with 400,000 seats and 800,000 users around the globe.

HP’s team includes AT&T, IBM, Lockheed Martin, and Northrop Grumman. They were squared off against a team led by Harris and Computer Sciences Corp., whose team also included General Dynamics, Cisco and Verizon.

The contract has two parts. One for enterprise services -- everything that touches the end user -- one for transport services -- the infrastructure portion. The teams could submit combined bids and bids on each part. It was HP’s combined bid that was picked as the winner.

Because of the multiple ways of bidding on NGEN, the two teams submitted seven proposals for the Navy to evaluate, Stackley said.

The evaluation process focused on getting the best price for the Navy so the bids were evaluated on a lowest price, technically acceptable criteria.

In addition to price and affordability, the Navy wanted:

• A mechanism to bring innovation to the network going forward.
• To gain greater command and control over the network.
• The ability to have continuous competition.

The contract is structured with one base year, worth $321.7 million, and four option years. The option years bring the total value of the contract to $3.5 billion. Already obligated to the contract is $140 million. NGEN is expected to save the Navy $1 billion over five years.

The structure of the contract also is different than NMCI in that the older contract was for a big “monolithic network,” Stackley said. But NGEN is broken up into segments and capabilities that can be served via task orders.

“The Navy will be buying services that will ride on top of the network the Navy owns,” he said.

One of the reasons for the change was to give the Navy more control. When NMCI was let in 2000 to EDS – later acquired by HP – the network was seen as an administrative network.

“But it became apparent over time that it really was a tactical network so the services needed to take control,” he said.

The flexibility in the structure of the contract will allow the network to evolve moving forward, he said.

The NMCI contract has been worth an average of $1 billion a year to HP. Early on the contract nearly bankrupted EDS and weakened the company to the point where it was a takeover target for HP.

“But the Navy and HP beat it into shape,” Stackley said.

While the value has gone down with this competition, it still gained notice from the top of HP.

“HP and its team of world-class partners recognize the importance of keeping the Navy’s backbone IT network secure, operational and moving forward for sailors and Marines to support their operations,” said HP President and CEO Meg Whitman in a statement.

Marilyn Crouther, senior vice president and general manager of U.S. public sector for HP Enterprise Services said, “We know the technology, we know what it takes to operate this massive and highly complex IT environment, and we now embrace the opportunity to help build a better enterprise network and continue the uninterrupted delivery of secure and reliable IT services while transitioning to NGEN.”

In its own statement, CSC officials said, “While this is not the outcome CSC hoped for, we’re proud of our team and the next generation technology solutions we put forth.”

The company said it will receive a debrief by the Navy and then evaluate its options.

A Harris spokeswoman said the company felt its proposal was cost-effective and had the right technology. The team was experienced. “All of which gave us confidence in our proposal,” she said.

The company will continue to support the NMCI program through the transition period.

Stackley said that while the Navy cannot prevent a protest from being filed, but the process the Navy followed in developing requirements and mapping those to the request for proposals and to the evaluation process give it confidence that it would prevail against a protest.

The transition period between NGEN and NMCI should take a year, but the goal is to complete the process in less time, Navy officials said.