Industries

Northrop Grumman and Virginia agree on new outsourcing contract

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Print this page by Paula C. Squires

The state and private-sector partner Northrop Grumman have hammered out a new computer services contract. It extends the contract for three more years to 2019, incurs $105 million in estimated new costs and demands a higher level of customer service.

In announcing the revisions today, Gov. Bob McDonnell said they resolve outstanding contractual, performance and financial issues that have dogged the state’s relationship with Northrop Grumman during its largest-ever privatization deal.  The Virginia Information Technologies Agency hired Northrop Grumman in late 2005 as part of a 10-year, $2.3 billion contract up to update and provide computer services to more than 80 of the state’s agencies.

Since then, the deal has been plagued with conflicts and performance complaints. The new contract is necessary, the governor said, “to address these matters at one time and in document in order for both parties to move forward with the important work of ensuring that Virginia’s state government stays online and on the job.”

The announcement comes at a time when defense giant Northrop Grumman is narrowing its choices for a new corporate headquarters. The company, which plans to move its Los Angeles based headquarters to the metropolitan Washington area, has been scouting sites in Arlington and Fairfax counties in Northern Virginia and in Montgomery County, Md.  It said earlier that it planned to make a decision this month. 

Since taking office in January, McDonnell successfully pushed for new legislation that gives the governor’s office, through the secretary of technology, direct management control over VITA. Its director previously reported to a management panel of governor appointees. McDonnell also installed new leadership, replacing the agency’s director, George F. Coulter, with former Del. Samuel A. Nixon, Jr., a fellow Republican from Chesterfield County. Nixon started the job to yesterday.

Under the terms of the renegotiated contract, the governor said Northrop Grumman has agreed to a large number of new customer service features, such as rapid response teams and an overhauled help desk, designed to address IT service issues as they occur.  In addition to the $105 million in additional cash payments to Northrop Grumman over nine years, the state is releasing $15 million in previously withheld contract payments after deducting $1 million in performance level penalties. It also is adding $47 million not in the original contract for additional security measures and enhanced disaster recovery.


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