Problems With Navy’s Planned NGEN-R Competition Pose Threat To Network

By Daniel Gouré, Ph.D.
Lexington Institute

February 21, 2017 – In a nation burdened by excessive government regulation, there is no more-overregulated part of the U.S. economy than the defense and aerospace sector. Whether it is the requirement to maintain a unique accounting system, endless demands for cost and pricing information, continual audits and inspections or over-the-top testing requirements, the sum of these parts is an acquisition system that is slow, inadequately innovative and increases costs for goods and services. Nowhere is relief from the heavy hand of government more urgently needed than in defense acquisition.

In addition to overregulation, defense acquisition is burdened by what can only be described as a penchant for faddish ideas. Over the past eight years a number of ideas have gripped the defense acquisition community to the point of absurdity. One example is the growing penchant for competition in defense contracting. This featured prominently in all three editions of the Under Secretary of Defense for Acquisition, Technology and Logistics’ Better Buying Power guidance. In order to show their commitment to competition, program managers and contracting officers started shortening the period of performance on new contracts, breaking up larger contracts into pieces each of which could be competed and even trying to entice companies into entering competitions for which they were not necessarily qualified.

Competition in defense contracting is a good thing, but not when it interferes with the ability of the suppliers to provide the military with best value. Shorter contract periods mean continuous churn in programs, raising costs for everyone and risking performance problems. In addition, how can the Pentagon ask companies to be more innovative and use more of their own resources when the period of performance on contracts can be too short to implement initiatives and realize a return on such investments?

Another contracting device that has become something of a fetish in some parts of the acquisition system, particularly on information technology (IT) projects, is the use of the standard of lowest price, technically acceptable (LPTA) as the basis for awarding contracts. The LPTA standard makes sense when you are buying toothpaste or toilet paper but not when you are dealing with military systems that must work nearly flawlessly while under assault. There is a significant difference between lowest price and best value. Would you choose a surgeon based on their offering you the lowest price or because of their knowledge and skills? LPTA has also had the perverse effect of forcing companies to reduce costs by dumbing down their professional staffs and reducing investments in research and development.

Leaders in the Department of Defense are virtually unanimous in identifying their networks as the linchpin for future warfare. Without functional and secure networks, Army air and missile defense won’t work, the Navy will not be able to realize its vision of distributed lethality and the Air Force will not be able to connect its fleets of fighters, bombers, tankers and ISR platforms. Why would acquisition officials want to place their networks at risk by engaging in faddish contracting processes?

An example of doing the wrong thing in the interest of adhering to such acquisition principles is the way the U.S. Navy is proceeding with the follow-on contract to support, maintain and modernize the Navy-Marine Corps Intranet (NMCI). The new contract, called Next Generation Enterprise Network-Recompete (NGEN-R) will replace NMCI and provide secure data and information technology services, such as data storage, email, and video-teleconferencing for around 700,000 users at 2,500 Navy and Marine Corps locations around the world. In addition, the new contract will integrate NMCI and the OCONUS Navy Enterprise Network (ONE-Net) to create a globally integrated network. The new program also will serve as the bridge to a futuristic Naval Networking Environment.

The Navy appears fixated on a contracting and management approach for the recompete that raises serious questions regarding the ability of both the government and the winning contractors to achieve NGEN-R’s objectives and price targets. The Navy was unhappy with the NMCI contract because the system was managed by a single contractor team that included a number of proprietary elements in the overall architecture. The current plan is to divide the overall work into two major parts, enterprise services and infrastructure, and 38 services. There are two huge contractor teams competing for this prize; both could win a portion of the overall effort with work on the individual services competed as task orders. Even more daring, the Navy has the option to take work away from the contractor team and put it out for competitive bid. Were this not enough change and uncertainty to inject in the process, the Navy will serve as the overall program manager, a job it hasn’t done for more than a dozen years.

The Navy is fixated on control and cost reduction. Unfortunately, it is pursuing these objectives by creating unnecessary risks. The military has never demonstrated a capability to manage large-scale IT projects. It lacks the staff and experience for this job. Splitting this contract into parts creates additional seams in the system with a heightened chance of technical problems. More seams in the system also creates additional opportunities for hackers.

NGEN-R is too important a program to take the risks associated with the Navy’s current acquisition approach. The Navy’s idea that it can simultaneously take management control of NGEN-R, drive down costs and increase innovation while maintaining the highest standards of  performance and security is fundamentally flawed. You can have your system cheap or good, not both. The new Secretary of Defense, a Marine, and the incoming Under Secretary for Acquisition need to take a hard look at the Navy’s plan.