EDS Leaves $680M on Table to Get Navy Deal

The outsourcer was looking for $780 million; it accepts $100 million from the government in an extension signing.

In snagging the three-year, $3.1 billion extension to its seven-year, $7 billion Navy-Marine Corps intranet contract, EDS walked away from $680 million in claims for services, according to Rear Adm. James Godwin, the top military officer overseeing the deal.

EDS and the Navy announced late last week they had agreed to the extension, in a dramatic resolution to the acrimonious relationship of previous years. The deal was signed originally in 2001.

In announcing the extension, both parties said EDS had accepted $100 million to settle its claims against the government for services rendered.

Although no lawsuit had been filed in the matter, EDS had sent the government bills for services that it believed that it had rendered.

The total of those claims came to $780 million, according to Godwin. EDS has declined to comment on the terms of the deal until its next quarterly statement, which is expected May 2, an EDS spokesperson said.

"This takes care of past history," said Godwin, in an interview.

"We had a fundamental agreement between myself and Mike Kuehler," said Godwin, adding that the agreement has the full consent of EDS CEO Michael Jordan and EDS president Jeffrey Heller.

Godwin also said the government has established how much the massive intranet is worth at present and can therefore calculate how much it will be worth in 2010 with the just-signed extension expires.

/zimages/6/28571.gifClick here to read more about the EDS-Navy-Marine Corps intranet contract.

At that time, the Navy may purchase the network from EDS or put it out to bid among other contractors, said Godwin.

"We needed to know what it costs, so at the end of this contract, we can re-bid it," said Godwin.

He said he compared an estimate from EDS with one done jointly by Booz Allen Hamilton and Gartner.

"When we put the RFP on the street, for EDS, IBM or CSC, well know what the price is. We could buy the network back from EDS," said Godwin.

In signing with EDS for the additional 3 years, no bids were considered from other parties, said Godwin.

"The new provisions will hold both the government and contractors accountable, with incentives and disincentives for good performance or lack of performance," said Godwin. "We never had that before."

The intranet now has nearly 300,000 installed user workstations and has an additional 58,000 to go before it is complete, said Godwin.

Most of those installations will be in the Marine Corps, recruiters and in a classified network, he said.

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