Inside the Navy NGEN IT services competition's teams and stakes

DXC, Leidos and CSRA are all seeking a major IT modernization foothold as they chase the Navy's NGEN IT services contract. What they told us about their strategies, plus how analysts are looking at the stakes for this competition.

Later this year, the Navy will award a much-anticipated multibillion dollar contract for broad IT services across its network.

That solicitation could drop any day now and the teams are still taking shape. But so far the fight for the services track of the almost $3.4 billion Next Generation Enterprise Network-Recompete is shaping up as a three-way showdown between three federal IT heavyweights.

In one corner: incumbent DXC Technology, who has held the work since 2000 when predecessor EDS Corp. won the contract to build the Navy-Marine Corps Intranet. Hewlett-Packard later acquired EDS and won the follow-on NGEN award in 2013. In 2017, Hewlett-Packard Enterprise merged with Computer Sciences Corp. in 2017 to form what is now DXC.

DXC’s U.S. government business will become part of the future “Perspecta” in May or June and is facing two other prime bidders for the NGEN services contract. One of those is Leidos, which earlier this year finished its integration with the former Lockheed Martin IT business.

The other is CSRA, which is in the process of being acquired by General Dynamics to create another almost $10 billion-revenue federal IT powerhouse alongside Leidos (CACI International tried earlier this month to top General Dynamics' offer but GD raised its bid and CSRA accepted that).

When three systems integrators chase a contract the size and scope of NGEN's "Service Management, Integration and Transport" track, it can be tempting to write it down as business as usual.

But how the Navy envisions this contract as part of its larger network modernization effort and the recent acquisition activity among the players pursuing this award create a much more interesting storyline about where agencies’ IT priorities are and how vendors are seeking to grab market share.

The NGEN SMIT winner gets a major foothold in IT modernization -- a main Trump administration priority -- and sets themselves up for continuing work based on the Navy's strategy to transform a global network that supports 700,000 Navy and Marine Corps users at 2,500 sites.

Procurement documents on SMIT detail what the Navy is looking for in terms of on-premise cloud, migration and cybersecurity capabilities from interested vendors.

"If they’re looking truly at re-architecting while migrating, whoever they choose is the most likely to have multiple capabilities that can keep things running well, while looking at moving and migrating toward some future state even if that includes migrating more," said John Slye, federal industry analyst at Deltek.

For this iteration of NGEN, the Navy is splitting the program into four contracts with this services track one of them. But as Slye told me, "whoever going to win this even with the split… the services side will be a fairly robust capability."

This award is also likely an interim step to what the Navy sees as its next future state, Slye said, so "the winner will be in position to continue future success there."

DXC has the almost two-decade incumbency in its favor and is hoping for continued success with the NGEN SMIT competition. But they are not taking anything for granted and have enlisted AT&T as a teammate in hopes of carrying their relationship from the 2013 NGEN iteration to the new one. AT&T, IBM, Leidos and Northrop Grumman are DXC’s partners on the current NGEN iteration.

DXC is bringing other members into its fold for the recompete and will have “more to talk about regarding our refreshed and strengthened team,” said Marilyn Crouther, who leads its U.S. public sector business.

Crouther told me AT&T brings to the team its “expertise in secure networking design and operation on a global scale” along with the telecom giant’s commercial reach.

“We are formalizing the team based on the existing contract and what we anticipate the Navy’s future needs to be,” Crouther said. “We will wrap up the team as we know more.”

With the Lockheed IT integration behind it, Leidos is throwing its increased scale and resources to go after NGEN as a takeaway opportunity. Leidos also has enlisted its own group of commercial market heavy hitters as teammates in IBM, Unisys and Verizon.

“Going back to the merger, the companies came together and brought us a scale that on their own they didn’t have,” said Dan Voce, a senior vice president and operations manager at Leidos. And its team for NGEN is also “continuing to form as it goes through different layers,” he said.

Much of what Leidos hopes to bring to the NGEN table can already be seen in other IT programs for the Defense Department, other civilian agencies such as NASA and worldwide in places like Australia.

“With millions of users under management, we know how to do big IT,” said D.J. Legoff, Navy division manager at Leidos.

CSRA has taken a different approach to forming its team for NGEN, which they have told us is forming as the acquisition further matures.

In an interview I conducted the week prior to the Feb. 12 General Dynamics announcement, CSRA’s Navy Vice President Nick Trzcinski explained his company’s ongoing approach to constructing its team.

“A big part of any winning team is getting the right partners: companies and firms with specific pieces of enterprise, important or unique capabilities,” Trzcinski said. "For a Navy-customer specific capability, if a teammate can bring (capability) ‘A,’ we want to bring it at an A-level.”

And similar to Leidos, CSRA already has experience in managing military IT networks from which it can draw from. Trzcinski cited CSRA’s work to manage in-theater IT on the “more dynamic and operational-focused side of the networks.”

The deal angle of this competition makes NGEN SMIT a competition of unique timing that is somewhat difficult to determine a favorite for as all three team leads have been drivers of government services market consolidation in recent years, according to analysts I spoke with.

General Dynamics’ vast shipbuilding business and worldwide presence with the Navy is one point in CSRA’s favor even with inherent disruptions in any large-scale merger, Joey Cresta, public sector IT analyst at Technology Business Research, told me after that deal’s announcement in February.

More recently, Cresta said Leidos could be helped by the fact that the timing of its deal means they have a “fast-mover advantage as they’re closer to settling into their new identity” than the other NGEN services players.

That said, incumbents can never be counted out of any competition. Regulatory filings on the future Perspecta say DXC’s U.S. public sector business has a “90 percent historical re-compete win rate” and some customer relationships that span over 50 years, the Navy included.

The Navy’s emphasis on innovation can be one indicator of which team might have the edge, analysts say.

Slye told me the award could signal the Navy’s level of aggression in how it wants to re-architect its network.

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