House Appropriators Question $50 Billion Navy Network

The House Appropriations Committee’s defense subcommittee is raising doubts about a costly new information system the Navy is proposing to purchase called the Next Generation Enterprise Network (NGEN, or “En-Gen”). NGEN would replace an existing Navy-Marine Corps network that is the largest intranet in the world (it has 700,000 users). The Government Accountability Office estimates the new network would cost $50 billion through 2025, but in a March 11 report warned that Navy cost estimates and schedules for the program are “not reliable.” The watchdog agency also stated that the new program was approved without a coherent requirements document or a rigorous assessment of the planned acquisition strategy.

In other words, NGEN is missing every one of the building blocks needed for a successful acquisition, and now House appropriators are expressing their alarm. A passage in the defense subcommittee’s fiscal 2012 spending bill recommends that the Secretary of Defense conduct an independent cost estimate and risk analysis of the program. With $1.7 billion set aside in the fiscal 2012 budget request for NGEN, that seems like the least the Pentagon could do. The Government Accountability Office’s March report recommended spending no more money on the program until it was put on a more professional basis.

If NGEN is sent to the Pentagon’s Cost Assessment and Program Evaluation (CAPE) shop for review, it is probably doomed (it may have been doomed anyway in the current fiscal environment). The Navy will not be able to explain why such a massive new investment is necessary when it already has a highly secure intranet that can support any type of media and has received superior satisfaction ratings from the uniform and civilian personnel who use it. The closest thing the Navy has to a rationale for NGEN is the contention that it needs more control over its intranet. Management of the existing intranet resides with Hewlett-Packard, which inherited a ten-year contract for end-to-end oversight of the system when it acquired Electronic Data Systems in 2008. The contract was recently extended to cover the transition to NGEN.

There’s nothing wrong with the Navy wanting more control, but the way the service plans to get there is a prescription for disaster. First it proposes to “unbundle” the various functions the intranet performs and parcel them out to several industry teams on a competitive basis. Then it proposes to recompete each bundle frequently, perhaps annually, to get the best deal. If this approach to procuring information services has ever worked successfully anywhere in the private sector, I haven’t found that place. Breaking up necessary functions for performance by discrete contractor teams creates chronic coordination problems and introduces discontinuities that intruders can exploit. Recompeting each bundle annually discourages investment by contractors and leads to continuous turmoil in relationships. The end result would be utter chaos, destroying a system that currently works very well. So House appropriators are right to wonder whether the Navy knows what it is doing.