Ross Wilkers

NAVY

Perspecta, Navy ink $787.3M NGEN contract extension

The recompetes of newly-minted Perspecta's largest contract for broad IT products and services to the Navy and Marine Corps still awaits to formally kick off but that will suit the incumbent just fine for now.

Perspecta has been awarded a one-year $787.3 million extension of the contract that pushes it out to Sept. 30, 2019.

The award comes nearly seven months after the Navy issued a justification-and-approval notice that authorized a 23-month extension that would continue the current work through May 31, 2020. That could still happen pending the release of the final solicitations, the timeline for award and any post-award protest.

For the next NGEN iteration, the Navy is breaking the contract into two new procurements: one for a bulk of the services work and a second for end-user hardware. All of this supports a global Intranet network that counts 700,000 Navy and Marine Corps users. The final solicitations for both tracks were scheduled for release "on or around July 31" but have not been posted yet.

The winner of the services piece especially gains a major defense IT modernization foothold amid growth in military spending and increasing focus on large upgrades to government technology systems. Including NGEN and its predecessor contracts, Perspecta and its heritage businesses have essentially run the main Navy-Marine Corps IT network for more than two decades.

Perspecta will have to fend off a pair of challengers to keep the NGEN services portion. A Leidos now fully integrated with the former Lockheed Martin IS&GS services business and General Dynamics with CSRA in tow since April have lined up teams to try and wrestle the services business away.

For its part, Perspecta is bringing current NGEN partner AT&T into the fold for the recompete. In Perspecta's Aug. 14 first quarter earnings call, CEO Mac Curtis also touted the company's added scale as a point in its favor through the three-way merger in June of the former DXC Technology U.S. public sector business with Vencore and KeyPoint Government Solutions.

“The notion of being part of Perspecta where it’s a 14,000-person, $4 billion-plus public sector company with the ability to innovate with the patent portfolio, advanced networking and really focusing on doing what’s best for the government customer is good for us,” Curtis said then.

Absent a recompete win, an extension on the current NGEN contract suits Perspecta just fine as they can add more past performance and devote more energy to integrating the businesses. When GD and CSRA announced their combination, analysts noted that large mergers can negatively impact bookings and recompete wins as attention diverts to integration activities versus bidding and proposal work.

The NGEN extension does mitigate some recompete risk to Perspecta's revenue rates. NGEN currently makes up 18-20 percent of annual sales and further delays on the recompetes could take that share down to 5-10 percent, Cowen & Co.'s defense IT analyst Lucy Guo wrote in a note for investors Thursday.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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