The Navy is now trying to build a new intranet, called NGEN, that will allow the fleet to own its own network, and will break up the system into five parts which will be bid out competitively. However, the Navy (meaning taxpayers) have started paying HP a new $3.4 billion contract to help transition to the new system over the next four years and buy back ownership of the network.

Loren Thompson of the Lexington Institute thinks the new system may be worse than the old one. "It's the most secure network the Navy has. Getting rid of it doesn't make a lot of sense." He's also concerned that the new system "is going to be full of seams and discontinuity, so it will be easily exploited by hackers."

HP would not comment for this story, but the computer giant has admitted that NMCI got off to a rough start. However, it says customer satisfaction surveys in 2009 show 90 percent of users now pleased with the network. The Navy says there are a variety of reasons why computers its members use at work are not like the gadgets they use at home. Security is paramount, and bandwidth is expensive, especially bandwidth on a ship.

As for NGEN, the Navy is currently getting information from the IT industry about how best to proceed, and HP may end up bidding for some of the new work. The first part of that "new work" will be a contract for network security—not providing it, but testing it. A so-called "Red Team" will be hired to test NGEN and see where it's vulnerable.

While Loren Thompson thinks NGEN is a waste of money, Noah Shachtman has talked to Navy personnel who can't imagine things could be any worse. One civilian employee told him, "HP is holding the Navy hostage, and there isn't a peep about it. We basically have two recourses: pay, or send in the Marines."

Watch for upcoming reports from Jane Wells and other CNBC correspondents on-air and online in our "The Fleecing of America"series, focusing on the federal budget, government spending, and the use of your tax dollars.

