This is the accessible text file for GAO report number GAO-03-33 entitled 'Information Technology: Issues Affecting Cost Impact of Navy Marine Corps Intranet Need to Be Resolved' which was released on October 31, 2002. This text file was formatted by the U.S. General Accounting Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products’ accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. Report to Congressional Committees: October 2002: INFORMATION TECHNOLOGY: Issues Affecting Cost Impact of Navy Marine Corps Intranet Need to Be Resolved: GAO-03-33: Letter: Appendixes: Appendix I: Briefing Presented to Subcommittees: Letter October 31, 2002: The Honorable Carl Levin Chairman The Honorable John Warner Ranking Minority Member Committee on Armed Services United States Senate: The Honorable Bob Stump Chairman The Honorable Ike Skelton Ranking Minority Member Committee on Armed Services House of Representatives: The National Defense Authorization Act for fiscal year 2002 (Public Law 107-107) directed us to review the impact of the Navy Marine Corps Intranet (NMCI) program on the information technology (IT) costs of Navy working capital funded industrial facilities. As agreed with your offices, our work focused on naval shipyards and air depots that operate under the Navy’s working capital fund. Because working capital funded facilities are required to set rates to recover all costs through charges to customers, our work also included NMCI’s impact on rates. NMCI is a multiyear program to outsource the vast majority of Navy and Marine Corps desktop, server, infrastructure, and communications asset and service needs. Through the NMCI services contract, the Navy plans to replace thousands of independent networks, applications, and other hardware and software with one secure network for all Navy and Marine Corps civilian and military personnel, including deployed forces. The Navy expects that significant benefits will accrue from NMCI over the life of the contract, including (1) an uninterrupted flow of information; (2) improvements to interoperability, security, information assurance, knowledge sharing, productivity, and operational performance; and (3) reduced costs. The Navy awarded the NMCI contract in October 2000 to Electronic Data Systems Corporation, for an estimated 412,000 to 416,000: workstations/seats[Footnote 1] and an estimated minimum value of $6.9 billion over 8 years. On August 30 and September 6, 2002, we provided your offices a briefing on the results of this review, including our scope and methodology. This report transmits the briefing, which is reprinted as appendix I. In summary, NMCI has not to date measurably affected either IT costs at shipyards and air depots or the rates they charge customers, because NMCI implementation at these facilities has slipped from fiscal year 2002 to the latter part of fiscal year 2003. However, shipyard and depot officials stated that NMCI transition activities during fiscal year 2002, such as site readiness and preparation, have had a minor effect on costs. We could not quantify their impact on IT costs because these costs were not separately identified. For fiscal year 2003, budget estimates show that NMCI will make up about 2 percent of total shipyard and depot costs and about 38 and 31 percent of shipyard and depot IT costs, respectively. Shipyard and depot officials told us that these NMCI cost estimates, which are a component of overhead costs, will not affect the rates charged to customers in fiscal year 2003 because they plan to reduce budgeted costs in other overhead accounts, such as travel, training, and real property maintenance, to offset budgeted NMCI costs. However, if activities are not successful in implementing plans or in offsetting unexpected costs that may arise during the year, they could operate at a loss and thus be required to increase rates in subsequent fiscal years. The impact of NMCI on IT costs and rates beyond fiscal year 2003 is unclear because, as we reported in our briefing, several issues peculiar to shipyards and depots were unresolved, such as how the costs of some transition items would be funded and whether these costs would be included in the rates. Moreover, NMCI implementation plans did not provide for resolving them because responsibility for doing so had not been clearly assigned and the Navy did not have an explicit issue identification and resolution process. This exacerbates the uncertainty surrounding NMCI’s future impact on shipyard and depot costs and rates, and limits these activities’ ability to plan and budget. DOD subsequently told us these issues have been resolved, but did not provide supporting evidence and did not specify its process for issue identification and resolution and who is responsible for the process. To ensure that existing and future issues are effectively and efficiently resolved, and thereby allow the shipyards and depots to make more informed planning and budgeting decisions, we recommend that the Secretary of Defense have the Secretary of the Navy direct the NMCI program manager, in collaboration with the Commanders of the Naval Sea Systems Command and the Naval Air Systems Command, to develop and execute an issue management process that resolves existing and future issues and includes: * participation by Navy shipyard and air depot officials, * continuous identification of relevant and material NMCI implementation issues, * shipyard and air depot implementation plans that include strategies for resolving these issues, and: * tracking of and reporting on issue resolution. In response to a draft of this report, DOD provided what it termed “official oral comments” from the Acting Deputy Assistant Secretary of Defense for Command, Control, Communications, and Intelligence. In its comments DOD stated that it agreed with the report. DOD also provided updated information on the unresolved issues discussed in the briefing (app. I). We have incorporated the information as appropriate. We are sending copies of this report to the Chairmen and Ranking Minority Members of other Senate and House committees and subcommittees that have jurisdiction and oversight responsibilities for the Departments of Defense and the Navy. We are also sending copies to the Secretary of Defense; the Secretary of the Navy; the Commandant of the Marine Corps; the Assistant Secretary of Defense for Command, Control, Communications, and Intelligence; and the Director of the Office of Management and Budget. Copies will also be available at no charge on our Web site at www.gao.gov. Should you or your staff have any questions on matters discussed in this report, please contact Randolph Hite at (202) 512-3439 or Gregory Kutz at (202) 512-9095. They can also be reached by E-mail at hiter@gao.gov and kutzg@gao.gov. Key contributors to this report were Barbara Collier, William Hill, Greg Pugnetti, Ronnie Tobias, Carl Urie, and Robert Williams, Jr. Randolph C. Hite Director, Information Technology Architecture and Systems Issues: Signed by Randolph C. Hite: Gregory D. Kutz Director, Financial Management and Assurance: Signed by Gregory D. Kutz: [End of section] Appendixes: Appendix I: Briefing Presented to Subcommittees: [See PDF for image] [End of figure] [End of Section] FOOTNOTES [1] Seat management generally refers to service provision arrangements in which contractor-owned desktop and other computing hardware, software, and related services are bundled and provided to a client (e.g., government agency) at a fixed price per unit (or seat). GAO’s Mission: The General Accounting Office, the investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. Obtaining Copies of GAO Reports and Testimony: The fastest and easiest way to obtain copies of GAO documents at no cost is through the Internet. GAO’s Web site ( www.gao.gov ) contains abstracts and full-text files of current reports and testimony and an expanding archive of older products. The Web site features a search engine to help you locate documents using key words and phrases. You can print these documents in their entirety, including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site daily. The list contains links to the full-text document files. To have GAO e-mail this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily E-mail alert for newly released products” under the GAO Reports heading. Order by Mail or Phone: The first copy of each printed report is free. Additional copies are $2 each. A check or money order should be made out to the Superintendent of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a single address are discounted 25 percent. Orders should be sent to: U.S. General Accounting Office 441 G Street NW, Room LM Washington, D.C. 20548: To order by Phone: Voice: (202) 512-6000: TDD: (202) 512-2537: Fax: (202) 512-6061: To Report Fraud, Waste, and Abuse in Federal Programs: Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov Automated answering system: (800) 424-5454 or (202) 512-7470: Public Affairs: Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C. 20548: