State expects revised Northrop Grumman deal to workJuly 28, 2010 6:00 AM
by Garry Kranz
One of Virginia’s most celebrated — and most embarrassing — public-private partnerships is getting a makeover. Gov. Bob McDonnell’s administration announced major revisions in April to a problem-filled contract between the Virginia Information Technologies Agency and defense giant Northrop Grumman Corp.
Among the highlights: an increase in financial penalties imposed on Northrop Grumman for failure to perform as expected and greater flexibility for state agencies to manage routine systems maintenance. “The new contract provides for much more structured and disciplined change-management processes,” says Sam Nixon, a former state lawmaker tapped by McDonnell to head VITA.
The changes also make it easier for Northrop Grumman to roll out new services to a large number of users at once, says Samuel Abbate, vice president of the Northrop Grumman Virginia Information Technology Infrastructure program.
In June, VITA and Northrop Grumman finalized agreement on 10 new service initiatives aimed at boosting operational performance and customer service. As part of the deal, Virginia has the right to enforce additional penalties of up to $5 million should Northrop Grumman fail to meet the agreed-upon performance standards by Jan. 1, 2011.
At the time of its approval in late 2005, the $2.3 billion outsourcing contract was the richest ever awarded by Virginia to a private company. It called for Northrop Grumman’s information technology division, based in Reston, to refurbish antiquated computer networks for about 90 state agencies. But missed deadlines, a billing dispute, poor service and fighting between the company and state agencies dogged the project almost from the start.
The original contract capped Virginia’s cost for services at $236 million annually. The original deal was to last 10 years. The new agreement maintains the cap but extends the deal for three years to 2019. It also adds an additional $105 million in new costs for hardware upgrades, data storage, helpdesks and other technology services to be paid during the next nine years. In exchange, Virginia releases $15 million in payments to Northrop Grumman that had been withheld as part of a billing dispute.
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