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U.S. Navy set to award giant computer contract

WASHINGTON (Reuters) -- The U.S. Navy said Thursday it would award next week a precedent-setting contract valued at up to $16 billion to take over the ownership, upkeep and updating of Navy and Marine Corps computers worldwide.

"It's going to be next week," Navy spokeswoman Lt. Jane Alexander said. Some contract watchers had expected the winner-take-all award to be announced later Thursday, at the close of U.S. markets.

In the running are the world's three largest computer service suppliers -- respectively: International Business Machines Corp. , Electronic Data Systems Corp. , and Computer Sciences Corp. -- plus General Dynamics Corp., the Pentagon's number four supplier last year.

The precise date of the planned announcement was not immediately available. Alexander said the Navy was considering holding an advance news briefing to emphasize the scope of the deal.

Art Money, the civilian who serves as the Pentagon's chief information officer, said in a September 15 letter to Congress that the Navy contract could become the model for how the Defense Department acquires computer "infrastructure" in the future.

The ultra-secretive U.S. National Security Agency, an arm of the Pentagon, said in June that it planned to turn to the private sector for the overhaul of most of its non-spying support technology in what could be a 10-year contract valued at up to $5 billion.

By 2020, the Pentagon plans to connect its myriad networks involved in war-fighting and intelligence collection in a vast new architecture it calls the Global Information Grid, or GIG.

The GIG, the outlines of which are still being shaped, aims to provide "a seamless, secure, end-to-end environment for both war-fighting and business applications," Money said in a September 6 speech.

The Navy contract -- for five years with an option to extend for three more -- could be worth as much as $16 billion if all options were exercised, making it the largest government computer-services contract on record.

The deal is part of a growing U.S. government trend to acquire computer services in line with standard commercial practices to boost efficiency, save money and keep up with the rapid pace of change in information technology.

It would tie together 360,000 desktop units and hundreds of existing networks and outsourcing contracts into a single "intranet," or private Navy-wide network, the Navy said.

Computer services "will be purchased from the commercial sector just as we buy other types of utilities (e.g. water, telephone, gas and electricity) paying for the service as it is delivered," the Navy said in a submission to Congress.

The contract, which is to begin on October 1, would be the largest ever for each of the contenders, which have lined up extensive teams of supporters. It requires that the prime contractor use small businesses for at least 35 percent of the work, and includes incentives for topping that figure. CSC, for instance, says it would have 60 subcontractors.

To facilitate cutting up the pie, the Defense Department has identified and publicized its roster of current small business information technology contracts in good standing.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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U.S. Navy
U.S. Marine Corps
IBM Corporation
Electronic Data Systems
Computer Sciences Corporation
General Dynamics
The Pentagon
The National Security Agency
U.S. Department of Defense

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