Contractors Spy Dollars In NSA Outsourcing

Contractors Spy Dollars In NSA Outsourcing<@VM>Groundbreaker Players Club

Lt. Gen. Michael Hayden

By Nick Wakeman, Staff Writer

Three leading systems integrators have begun selecting partners as they gear up for a $5 billion National Security Agency contract to outsource its basic computer and telecommunications operations.

While a request for proposals still is several months away, teams of contractors are being led by AT&T Corp. of Basking Ridge, N.J., Computer Sciences Corp. of El Segundo, Calif., and OAO Corp. of Greenbelt, Md., industry sources said.

The contract is expected to be awarded in spring 2001 and could be worth $5 billion over 10 years. Called Groundbreaker, the contract would move 4,000 to 5,000 information technology workers from the government to the private sector.

NSA is looking to outsource distributed computing, enterprise and security management, networks and telephony, according to a statement by Air Force Lt. Gen. Michael Hayden, NSA director. Outsourcing will allow the spy agency to modernize and improve its IT infrastructure and shift money to its core intelligence functions, he said.

"It is critical that we have a robust and reliable infrastructure capable of supporting our missions," Hayden said.

The agency needs to invest more money in technology to gather intelligence from new sources, such as fiber-optic networks, satellite communications and the Internet, said an industry source familiar with the agency.

"This is an attempt by the agency to recapitalize its resources for the future," the source said.

The teams chasing the contract all boast extensive outsourcing experience. AT&T's team includes IBM Corp. of Armonk, N.Y., which is recognized as one of the largest providers of outsourcing services in the world. Most of its outsourcing work is in the private sector.

CSC, also a major outsourcing player, is leading a team that includes Andersen Consulting of Chicago, General Dynamics Corp. of Falls Church, Va., and TRW Inc. of Cleveland. In addition to several large commercial contracts, CSC is providing outsourcing services to the county of San Diego under a seven-year, $644 million contract. Also, the company in December 1999 won the $680 million Army Wholesale Logistics Modernization contract, a 10-year IT outsourcing project.

OAO, whose team includes Raytheon Co. of Lexington, Mass., provides outsourcing services to four NASA centers and at the agency's Jet Propulsion Laboratory.

No officials from any of the three companies leading the bidding teams would comment on the NSA contract, not an unusual situation when dealing with the super-secretive NSA.

Affiliated Computer Services Inc. of Dallas is on one of the teams, but William Woodard, president of ACS Government Solutions Group, declined to name which team.

With its size, scope and high prestige, the NSA contract is being greeted by many in industry as a strong sign that the government is moving more aggressively toward outsourcing.

"This is the clearest signal to date that the federal government is taking outsourcing seriously and is following a commercial model," Woodard said.

The outsourcing trend is picking up, especially in the Defense Department, of which the NSA is a part. Many defense organizations have begun A-76 studies evaluating whether an operation should remain in house or be outsourced to the private sector, he said.

"Outsourcing is going to strengthen as we go forward," said Narenbar Mangalam, director of security solutions for Computer Associations International Inc. of Islandia, N.Y. He also would not say if his company is involved in pursuing the NSA contract.

Mangalam said Computer Associates is seeing more outsourcing opportunities for specific functions in the government, such as security, storage and general IT operations.

"Outsourcing allows you to focus on your core mission," he said.

Through its contract, NSA may be creating the model for large-scale outsourcing in the federal government, said Lorrie Scardino, research director for the market research firm GartnerGroup of Stamford, Conn. "The federal government really doesn't have any best practices to look to because they haven't done anything on this scale before," she said.

But moving the NSA contract forward likely will not escape controversy. The contract calls for moving several thousand government employees to the private sector, industry officials said.

One source said NSA is looking at moving 3,000 civilian employees to the private sector. Another 1,000 contractor employees also could be moved.

All those workers are scattered at 450 locations around the world. The winning contractor will have to develop a plan for hiring those employees, the source said.

The issue of what happens to government workers is often what derails large government outsourcing initiatives, Scardino said. Difficulties in persuading state employees was one of the reasons Connecticut last year failed to go forward with a $1.35 billion outsourcing project after selecting Electronic Data Systems Corp. to perform the work, she said.

"You have to deal with employees openly, honestly and often," she said.

The winning contractor should use a "pull approach," said ACS' Woodard. "You have to make it attractive to join the private sector," he said.

And throwing money at the workers is not always the key, Woodard said. "A lot of people enter federal service for more than just the job," he said.

Those employees believe in the mission of the agency they join. "For those people, you have to show them that they can serve that mission from the private sector," he said.

Small pilot projects in the federal government that move workers to the private sector have occurred, including one at NSA called SoftLanding. In August 1998, NSA awarded a $20 million contract to CSC to provide life cycle and computer operations support to several NSA systems.

About 50 government and contractor employees have become employees of CSC through that contract, an NSA spokesman said.

The agency considers the SoftLanding pilot a success and is applying lessons learned from that project to the Groundbreaker contract, the spokesman said.

Another key factor in potentially moving a large number of government employees to the private sector is Congress, which is certain to keep a sharp eye on the project, industry officials said.

Lawmakers have criticized NSA for not investing in its infrastructure and failing to make the organizational changes needed to keep up with rapidly changing technology.

"As a result, the NSA enters the 21st century lacking the tools necessary to maintain the status quo, much less meet emerging challenges," according to a statement from the Senate Select Committee on Intelligence, which in early May unanimously approved the fiscal 2001 intelligence authorization bill that covers the NSA and other intelligence agencies.

The committee said its top priority is modernizing NSA.

The extra scrutiny should help NSA director Hayden get the changes he wants, a source said.

"Hayden has a mandate, and he isn't the only guy who recognizes that they need to make changes," the source said. "This is a doable do."

NSA has spent the last 15 months studying whether to outsource its IT infrastructure with the help of Booz-Allen & Hamilton Inc., a McLean, Va.-based consulting firm. "They seem to be taking a very analytical and methodical approach," Scardino said.

Getting adequate funding from Congress to kick off the project could be an issue for NSA, said Stewart Lawler, a principal consultant for the market research firm Federal Sources Inc. of McLean, Va.

"But if you want to get an agency up to speed and get them current technology, you almost have to go this route," he
said.





AT&T Corp. team

IBM Corp.



Computer Sciences Corp. Team

Andersen Consulting

General Dynamics

TRW



OAO Corp. Team

Raytheon Co.


The Contract:

? NSA Groundbreaker

? Outsourcing of distributed computing, enterprise/security management, networks and telephony

? Worth $5 billion over 10 years

? Award expected spring 2001

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