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Industry Giants Seek Defense Telecom Prize

By Dennis McCafferty

Staff Writer

CSC's Pat Ways

Industry teams that read like a who's who in systems integration, telecommunications and subcontracting are chasing a pending defense modernization contract worth $3 billion that hails a new wave in megadeals.

The U.S. Navy intends to award the Voice, Video and Data contract at the end of this month, said officials familiar with the contract. The contract, worth an estimated $2.93 billion, will run for one year and include nine option years, officials said.

AT&T's Dick Lombardi

"We are no longer the drivers in technology as we were 10 to 12 years ago,'' said Rear Adm. Stephen I. Johnson, commander of the Naval Information Systems Management Center. "In order to get the technology products we need and to enter the information age and have it available for modern warfare, we need to ride the modern, commercial wave.''

Confirmed prime contractor bidders include AT&T of Basking Ridge, N.J., Lucent Technologies of Murray Hill, N.J., Bell Atlantic Corp. of Philadelphia, and GTE Corp. of Stamford, Conn., according to Federal Sources Inc. of McLean, Va.

Integrators teaming with primes include Lockheed Martin Corp. of Bethes-da, Md., and Computer Data Systems Inc. of Rockville, Md., with Bell Atlantic; and Electronic Data Systems Corp. of Plano, Texas, with GTE.

Subcontractors include BBN Corp. of Cambridge, Mass.; Wang I-NET Government Services of McLean, Va.; Pacific Bell of San Francisco; Litton-PRC Inc. of McLean, Va.; and US West of Englewood, Colo., according to Federal Sources.

Disadvantaged, women-owned and other small businesses are to receive no less than 15 percent of the contract's support services delivery orders, reports Federal Sources.

While the prize seems substantial, as with many other federal awards these days, there's a catch: With government agencies encouraged to shop for similar communications products through other contracts, the multibillion-dollar booty may be sliced down to size for the winners. And multiple prime contractors may have to divvy up the award.

The contract grew out of the Naval Telecommunications Infrastructure Project. After Pentagon officials revealed initial program outlines in February 1995, vendors complained that the Navy project needed to emphasize systems integration and data services.

While the contract represents a bundle in award opportunity, competition from other IDIQ contracts could reduce that.

"In the old days, if you wanted a piece of a contract or all of it, you knew the work was coming in if you got [the prime contract],'' said Lauren Steinkolk, the Federal Sources database director who tracks VIVID and other Navy technology contracts. "Now, you don't have that much bargaining power .... Vendors have to be careful not to expect so much from a contract.''

A Navy IT outsourcing program for computer and communications purchases now entering the pilot stage is one example of an effort that could compete with this latest IDIQ vehicle. It has an estimated value of $500 million. Another Navy program offering similar technology to VIVID is the PC-LAN Plus, a $570 million, IDIQ contract awarded in January 1996 to EDS for local area network products, training and integration.

But industry insiders familiar with VIVID are confident that VIVID will fulfill all or most of its agency customer needs and will be the preferred purchase vehicle. In their view, it's all part of continuing shifts in the contracting game.

"The fact that there's [$3 billion] worth of work out there doesn't guarantee anybody anything, and VIVID is going to be like that,'' said CSC's Pat Ways, a company vice president overseeing federal business development.

Other company executives declined to address the VIVID contract directly but generally agreed that changes in technology and government procurement demand flexibility.

"It's different from winner-take-all,'' said Dick Lombardi, president of government markets for AT&T. "But [competitive contracts] are becoming more and more the way government is doing business. All it means is that, at the base level, real competition takes place. It's good for the taxpayer and it keeps industry on its toes. It's good all around.''

With the demand for newer, better technology, partnerships between telecommunications companies and integrators are on the rise. AT&T often seeks businesses that can complement its products and services with local area network and multiple-subcontractor management.

"It's pretty clear to all of us in this industry that there's a convergence of telecommunications and computing,'' Lombardi said. "It's really becoming one industry.''

From an integrator's point of view, it's a chance to play envoy when a national project involves several telecommunications companies that are often pitted against one another.

"We view ourselves as a neutral party which is in a position to work with all of them,'' said Mike Corrigan, the EDS vice president of telecommunications for the company's military systems operations in Herndon, Va.

"In some cases, they may have difficulty working with each other but are happy to work together under an integrator umbrella,'' he said.