This week a top Leidos [LDOS] official said a lawsuit over the company’s win of the Navy’s Next Generation Enterprise Re-compete (NGEN-R) contract will likely delay transition until 2021 while the incumbent protestor expects an extension of the existing contract in the meantime.
“As the NGEN protest has moved from the GAO, where it was fully decided, to the Court of Federal Claims, we remain confident that this protest will be resolved in our favor. However, this does delay the full transition until late in the fourth quarter, continuing into 2021,” Leidos chief financial officer James Reagan, said during a quarterly earnings call on Aug. 4.
Leidos initially won the NGEN-R Service Management, Integration and Transportation (SMIT) contract worth up to $7.7 billion in February (Defense Daily, Feb. 6).
Fellow competitors General Dynamics [GD] and legacy NGEN incumbent Perspecta then protested the decision, but the Government Accountability Agency (GAO) denied both in June and released the full decisions in July (Defense Daily, July 16).
However, in early July, Perspecta filed a lawsuit against the Navy over the contract.
“We remain confident that we will prevail on the U.S. Court of Federal Claims, and we look forward to ramping up the important work for our customer later this year. Until then, the award will be excluded from our reported backlog,” Reagan said.
Assuming Perspecta loses the case, Reagan said when Leidos is allowed to proceed, “the NGEN program will take some time during 2021 to ramp up” first before the program will be reflected in the company’s financial growth figures.
Separately, during its Aug. 6 earnings call, Perspecta Chairman and CEO Mac Curtis said, “we did file with the court of federal claims, and we didn’t take that lightly.”
Curtis said, as the incumbent, Perspecta is under contract for the legacy NGEN program through the end of December. He expects the Navy to extend it at least another six months as the lawsuit proceeds in the courts.
“Now it’s public that the Navy came out and said, they want to basically…have to put a contract out for our discussion that would extend this contract from the first of the year through June. So it’s a six-month contract extension and three one-month options after that.”
Curtis added that “if this happens, which we believe it will, that it’s feasible that we’ve got a contract through the end of June” and including the options it could last through September 2021.
NGEN-R seeks to replace the legacy NGEN contract vehicle that provides information technology capability and support services to the Navy Marine Corps Intranet (NMCI) and Marine Corps Enterprise Network (MCEN) users and stakeholders. NGEN-R plans to add information technology coverage outside the continental United States (OCONUS) via a new OCONUS Navy Enterprise Network (ONE-Net).
The Navy is also splitting NGEN into two sections in a bid to save money: SMIT and end-user hardware (EUHW).
SMIT covers base network services covered by the current Perspecta NGEN vehicle like electronic software deliver, end user core build, endpoint detection, and network operations.
Previously, the Navy awarded the $1.4 billion EUHW contract to Hewlett Packard, Inc. [HPQ] last October without protests (Defense Daily, Oct. 9, 2019).