Systems Integration: The Impact of the NAVFAC CAD 2 Award on the A/E Community

W. Bradley Holtz, A.I.A.
President, WBH Associates
Conference Director, A/E/C SYSTEMS
Bethesda, Maryland, USA

Introduction

This morning I will inform you of an important development that has had and will continue to have a profound impact on our industry. This development is the split award of the NAVFAC CAD 2 contract to Cordant and Intergraph. I will begin by giving you some background information on the CAD 2 program and an overview of the NAVFAC contract and its participants. After a brief description of the history of the award, I will explain a few critical details of the contract that will have a significant impact on the A/E community.

The CAD 2 acquisition program was devised as a means of bringing the United States Navy into the twenty-first century. The "product model" concept was identified in 1986 as the most important technical development related to the future of the life-cycle design concept. The CAD 2 program incorporated this concept in addressing the needs of the Navy "facilities engineering and management personnel to increase facilities management productivity, reduce costs through life-cycle facilities management, and reduce errors through improved information management.  Initially there were to be five separate contracts, one each for command component of CAD 2:

  • NAVSEA: Naval Sea Systems Command
  • NAVSUP: Naval Supply Systems Command
  • NAVAIR: Naval Air Systems Command
  • SPAWAR: Naval Warfare Systems Command
  • NAVFAC: Naval Facilities Engineering Command

The NAVSEA contract covered the "Design, Manufacturing, and Maintenance of Ships and Onboard Equipment." Primarily mechanical engineering and manufacturing, the $362,000,000 contract was awarded to Intergraph in 1991.  This contract placed a strong emphasis on analysis and manufacturing software, and included the provision for 2,800 workstations and servers. Intergraph used their proprietary InterPro 2000 and 6000 series workstations and I/EMS software to win the contract, beating out a team including Sun and Computervison.

The NAVAIR bid (NAVAIR and SPAWAR components were merged) covers the design and manufacturing of NAVY airframes, space platforms, and advanced electronics systems. Primarily aerospace engineering and electronics, and electronic warfare, the $300,000,000 bid is still under consideration. Bids have been submitted, but the contract  has not been awarded. Major players in the bid are EDS (with the Unigraphics CAD/CAM system), IBM (with the Catia CAD/CAM system), and Intergraph (with I/EMS).

The NAVFAC contract covers the areas that have direct impact on the A/E community: Architecture, Facilities Management, and Geographic Information Systems. The contract award covers an eight-year period for purchases, plus an additional four-years for services, maintenance, and support, for a total contract life of 12 years. The award  is an IDIQ award worth up to $550,000,000 over the life of the contract. An IDIQ award (Indefinite Delivery, Indefinite Quantity) is essentially a right to sell to the government without going through any additional competitive bidding. The government makes a very small commitment to purchase off the contract, but authorizes further purchases by individual operating units within the government as they acquire the appropriate budget authority. Basically when a group has the funds, it can buy from the contract. A split award, as in this case, just means that when a group has the funds, that group can pick and choose among and between the vendors' offerings.

What the contract includes.

The hardware side of the contract includes 5,300 workstations and servers. There are essentially three different configurations. Component Design Workstations are intended for use by individual architects, engineers, or planners working on individual components of a project, with information that will be used by others. As these components are combined into subsystems associated with a specific discipline, a more powerful platform is required: the System Design Workstations, which have 19" displays with approximately 1200 x 800 pixel resolution. Finally, working with data covering entire facilities requires more processing power and more display to work with. The Facilities Design Workstation meets this function, and includes a 25" display with resolution of approximately 1600 x 1200 pixels. Early on in the bid process, the Navy announced that large screen size and high resolution were going to be mandatory requirements of the bid. At that time there was no suitable product on the market. As a direct result of that impending requirement, Intergraph developed and acquired the 27" high resolution display system, two years ahead of the competition. Even late in the bidding process that particular point was an issue. The availability on the market today of displays with resolutions in the range of 1600 x 1200 can only be attributed to this bid.

Software is where this contract will have the biggest impact on the A/E community. Every area associated with the architecture, architectural engineering, facilities management, and geographic information systems is covered. Here are the categories as they are listed in the contract documents:

System Software

  • MS-DOS
  • Programming Languages, Assemblers, Compilers, etc.
  • Knowledge-Based Shell
  • Engineering Information Management System Software (EIMS)
  • Wireframe Modeling
  • Surface Modeling
  • Solids Modeling
  • Drafting and Drawing Generation
  • Geometric and Mass Property Analysis
  • Relational Database System (RDBMS)
  • Model and Drawing Management System (MDMS)

Mapping Engineering Applications

  • Basic Mapping
  • GIS
  • Image Processing
  • Digital Terrain Modeling
  • Utilities Management
  • Facilities Master Planning

Architectural Engineering Applications

  • Architectural Programming and Design
  • Architectural Documentation
  • Interior Design and Space Management
  • Landscape Architecture
  • Industrial Process Simulation

Civil Engineering Applications

  • Surveying
  • Site Modeling and Material Quantity Estimating
  • Shallow Foundations Design & Analysis
  • Slope Stability Analysis
  • Retaining Wall Design & Analysis
  • Environmental Engineering
  • Traffic Engineering
  • Pavement Systems
  • Hydrology
  • Water Supply Systems
  • Wastewater Systems

Structural Engineering Applications

  • Structural Systems Layout
  • Structural Analysis
  • Steel Detailing
  • Concrete Detailing
  • Masonry Detailing
  • Timber & Light Frame Detailing

Electrical Engineering Applications

  • Indoor Electrical & Lighting Design
  • Outdoor Electrical & Lighting Design
  • Communications, Control, Fire & Security Systems
  • Electrical Analysis

Mechanical Engineering Applications

  • Pipe Network Analysis
  • Energy Analysis
  • Industrial Ventilation Analysis
  • HVAC (Heating, Ventilation, and Air Conditioning)
  • Plumbing
  • Fire Protection

Miscellaneous Software

  • Cost Estimating Interface
  • Technical Document Authoring
  • Project Management & Planning

Engineering Analysis Applications

  • Finite Element Modeling (FEM) & Post-Processing
  • Basic Finite Element Analysis (FEA)
  • Advanced FEA
  • Heat Transfer and Stress Analysis
  • Offshore Structures Analysis
  • Linear Systems Dynamic Analysis
  • Kinematic and Dynamic Analysis
  • Data Analysis
  • Failure Analysis
  • Thermal Analysis
  • Continuous System Analysis
  • Classical Stress & Strain Analysis
  • Optimization Analysis
  • Control System Analysis
  • Fluid Flow Analysis
  • Symbolic Manipulation
  • Mechanical Part Design

Each item listed is a line item on the contract; each is comprehensive and complete within its field. With the dual award, it is quite possible, for example,  to order the Landscape Architecture package from one vendor, and the Interior Design and Space Management package from the other vendor. This is unlikely to happen in the early stages of the contract life, but as these vendors compete they will make this situation more and more reasonable. And in a sense, that is the whole point of truly integrated systems. This interchangeability will mean that users can choose whichever product suits them best, without having to worry if that product will work well with their other products. These products will eventually be interchangeable to the same extent that WordPerfect and Microsoft Word are interchangeable in today's office.

In addition to hardware and software, the award includes provisions for training, education, and services. The scope of this is immense. Over 13,000 on-site classes, plus approximately 150,000 student-days of courses held at a vendor’s location. This a massive training initiative. The impact of that much training focused on the offered products will change the availability of trained personnel in the general market, and will reinforce the dominance of the products associated with this bid. Audio-visual training, Computer-Aided Instruction, and self-paced instruction courses are also part of the procurement. Since the cost for developing these products can be spread over the life of the contract, these products can be made widely available at reasonable prices. Prior to this contract such products were rare and expensive. The contract requires that these training tools be made available for each and every software product offered, not just those in wide distribution. The contract provides for 80 person-years of consulting services of computer technicians and scientists, 130 person-years of engineers, and 40 person-years of clerical workers. Maintenance and support services are also accounted for.

The Players.

The award was made to two bidders, Intergraph and Cordant. Intergraph bid its InterPro 2000 and 6000 series workstations, MicroStation as the graphics platform, MGE as the GIS platform, and Informix as the database platform. Other software, plus services and training, are primarily provided by Intergraph, although there are other vendors participating in Intergraph's solution. The Cordant bid is quite different in structure. Cordant is a Systems Integrator, and manages the bid and contract. On Cordant's team are Sun, Autodesk, Informix, ESRI, Erdas, Softdesk, Byers, CADPlus, CIMAGE, EDA, Elite, FMS, and GTX, Fluor Daniel, and Mandex. Cordant bid Sun Classic and SPARCStation LX workstations, AutoCAD as the graphics platform, Arc/INFO and ERDAS as the GIS platform, and Informix as the database platform. (Informix is in the enviable position of being part of both solutions.)  Other software is provided primarily by Softdesk, with Byers, CADPlus, CIMAGE, EDA, Elite, FMS, and GTX. Mandex and Fluor Daniel are providing the technical services personnel.

History.

The initial impetus for the CAD 2 project came around 1985. By May 1987, the Navy had produced an impressive 1,300 page document covering all the possible requirements of all the bids. The first Request for Proposal (RFP) was from NAVSEA and came out in September 1989. Bids were submitted in the spring of 1990, but the contract was not awarded until June 1991, to Intergraph. The award was initially protested by the only competing bidder, but the protest was withdrawn. The NAVFAC  RFP was let in August 1990, prior to the award of NAVSEA to Intergraph. It was more than a year and 20+ amendments later before the bids were submitted by Intergraph, Cordant, and FCC (a systems integrator for IBM). The contract was awarded to Intergraph. Cordant and FCC filed a protest claiming that the Navy did not follow its own procedures properly. The protest was successful. The Navy revised the RFP to meet the requirements of the court decision. After further rounds, the contract was awarded in a split award to Intergraph and Cordant. The award was not divided between them; they each share in the opportunity to sell any and all of their solutions to any and all sites. The split award gives no guarantees to either party. This sets the stage for an intense level of competition between Cordant and Intergraph as they must compete for each and every sale. Since the prices are set by the terms of the contract, the primary method of the competition will be technical, i.e., better products mean more sales.

Critical Details of the Contract

There are several clauses in the contract documents that separately, or in combination, impact the A/E Community. COTS refers to "Commercial, Off The Shelf" products. While not a strict requirement for this particular bid, the components of the bid are intended to be standard commercial products, not special products just for the Navy. The net result is that all product development necessary to meet the requirements of the contract goes into products that anyone can buy.

Technology Improvements

Vendors are encouraged to propose technology improvements so that the Navy may save money, improve performance, save energy, meet increasing requirements, or any other reason. Vendors must respond within six months to requests by the Navy for specific technology improvements. This is the provision that will keep the competition flowing over the life of the contract. Many contracts of this type tend to fade away over the years. That won't happen here for three reasons. First, the split award means that the vendor is not the sole source and therefore can't sit back and reap the benefits without keeping its products current. Second, the vendors must respond within a reasonable period to enhancement requests, allowing the users to drive the development of the products. And third, the vendors have an avenue to bring into the contract any developments from the outside to improve their offering.

Computed Price Differential

One of the stranger clauses in the contracts is the Computed Price Differential (CPD). This is a factor that the Navy uses to guarantee that it will get the same discount level that it bargained for, no matter what happens with the technology improvements. CPD's are grouped into general categories. The price of any new or replacement product is limited to the commercial list price times the average discount that is in the contract for this type of product. While this sounds simple, it has many ramifications. The pricing portion of the contract is quite complex, and includes time-discounted value of money, differential pricing of products by year of contract, and wide ranges of discounts allotted to items within a given category. The net result is that vendors can manipulate their pricing schemes in the contract to appear beneficial to the Navy. The downside is a risk that they could be caught in a CPD trap, requiring them to sell products they hadn't planned on including at discounts they can't afford. Any product that any vendor related to this contract must be made available at a cost controlled by the CPD. The overall effect the Computed Price Differential has on the A/E community is a strong incentive to keep the commercial list prices of software artificially high. If this plays true, then higher levels of discounting to good commercial customers should be expected. The alternative is for the parties to the contract to create new operational entities out of existing companies so as to shield their products from this clause

License Terms and Software Locks

It is not possible today to purchase many software products outright. Many products are sold only on a license basis, with an annual fee, or are tied to the power of the machine they run on. Vendors who have had these policies in the past are party to this contract, and have agreed here for the first time to the following terms:

All software must be available to be sold as a "perpetual license" without additional fees (outright purchase). Pricing for software is the same on all platforms and can not be priced differentially by platform. Physical devices (e.g., dongles), restrictions to a specific CPU serial number (node locking), or charges based on the amount of usage are prohibited.

Many applications that were never before available as floating licenses are being made available this way for the first time. This contract has forced many reluctant vendors to venture away from their highly protected and restrictive licensing policies as a direct result of this contract. For those that relied on pricing tied to usage, and those whose software products were only leased and never sold, this first step is a painful one, and one that will take some time to absorb. For others, it was the straw that broke the camel's back over restrictive licensing policies, as was the case for MicroStation, the latest version of which has removed the security dongle.

Software Maintenance for Life of the Contract (12 years)

Stability is one of the offshoots of the contract. Vendors are required to continue to support all products, even those that have been replaced, for the life of the contract, unless the Navy approves otherwise. Now anyone buying any offered product, whether buying off of this contract or not, can feel assured that that product will not be abandoned. Product life is essentially guaranteed for the contract life of 12 years. Vendors are relatively certain of maintaining a strong financial base during the life of the contract and the technology advancement clauses essentially guarantee that the product lines will remain at the front of the state-of-the-art for the same period. The contract is likely to remain active because competition and technical improvements will keep the contract desirable.

Integration

One of the prime thrusts of the CAD 2 initiative is moving the CAD software and applications industry kicking and screaming towards a level of integration between components that already exists in the hardware industry. The contract explicitly mandates levels of integration and minimum allowable data exchange level for each specific component of the bid, between programs, between programs and applications, and between the user and the computer. The contract also demands compliance for POSIX, CGM, 3D DXF, and IGES standards. At the lowest level of data exchange is manual data interchange, or reentry of data: a printout from the source program is read by the user and manually keyed into the target program. A slight step up from this is edited data interchange: output of the source program is edited manually to prepare it for use as input into the target program. Translator program data interchange occurs when the output of the source program is fed into a translator program to prepare it for input into the target program. Most of the programs and applications on the market today can communicate at this level. Better yet is neutral file data interchange. Here, output of the source program coincides with an import format of the target program. An example of this is the use of the DXF format as output from AutoCAD to be used by an application that accepts DXF as one of its input formats. The highest level of data exchange is the use of a common database where both the source and target act directly on the same data. MDL applications within MicroStation, and ADL applications within AutoCAD act at this level. By clearly defining these levels of exchange, and by emphasizing their importance in the overall scheme, the Navy has done the architectural community a great service: forcing the industry to make applications work together well.

Other impact on the architectural community

The shear size of this contract gives it significant weight in the industry. At an estimated $80,000,000 direct annual impact and an estimated secondary market at 2-5 times that amount the combined impact is 10-30% of the total A/E market, estimated by Daratech to be approximately $1,400,000,000 in 1992. Obviously, anything associated with this contract will make waves in the entire A/E market. This will reinforce the defacto standards set by AutoCAD and MicroStation and their applications due to their expected increase in combined market share which comes at the expense of those not in the contract. It will also go beyond reinforcing graphics standards to include the emergence of and support for certified standards for procedures and analyses. As far as price factors, the tendency for prices to remain constant in the general market to compensate for computed price differentials will be offset by the competing tendency for prices of applications to come down as the development costs are underwritten by this contract.

Competition + Cooperation = Coopetition

Cordant and Intergraph will be at each other’s throats trying to win over each individual Navy site and user. Competition will be intense among third-party vendors vying to replace contract participants via technology improvements. In contrast to this competition, the various components of each solution must move towards higher levels of integration as mentioned earlier. AutoCAD and MicroStation must exchange data without loss of intelligence, as must ArcINFO and MGE. Seamless transitions within each solution must be maintained when dealing with sites having mixed solutions. The only way that this is going to happen is if there is some level of cooperation between the vendors. This leads to the current situation of "coopetition" which has both vendors offering support of opposing products by their service organizations, each vendor trying to out perform the other through technology improvements since pricing is controlled. This in turn will lead to faster enhancement cycling and the requirement for increased level of integration between competing products, at all levels. Coopetition also enhances communication between systems, across networks, and among vendors.

Summary: Advancing the state of the art

A large number of developments affecting the architectural community have already come about as a direct result of this bid. Between 30% and 50% of the changes and improvements made in the upgrade from AutoCAD release 11 to release 12, and in the upgrade from MicroStation 4 to V5 were related to this bid. As already mentioned, the "Large, High Resolution Display” was developed solely for the purpose of this bid. The general market move towards binary compatibility with DWG files was reinforced by this bid. The inclusion of simple raster capabilities in the base CAD products was not a marketing decision so much as a method of gearing the product lines to lower the price impact on the bid. As to future technology fallout, look to improvement in the model and drawing management systems, to entrenchment of NT and POSIX, to acceleration of the pace product improvement, and to significant improvements in the integration of applications within CAD systems and across software platforms. The A/E community owes a note of gratitude to the NAVFAC CAD 2 procurement and split award for pushing the industry so far, so fast. As participants, we should keep an eye on the progress of the contract participants as the dominant players in our marketplace.