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Northrop Grumman to pay for cost of independent review

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by Paula C. Squires


Gov. Bob McDonnell toughened his stance Thursday in a growing political imbroglio involving private computer contractor Northrop Grumman. McDonnell said Northrop Grumman has agreed to pay for the costs of an independent investigation into a weeklong computer crash that disabled nearly a third of the state’s agencies and has led to extended hours over the Labor Day holiday for the Division of Motor Vehicles.

“I have spoken personally with Northrop Grumman CEO Wes Bush,” McDonnelll said in a statement. “I expressed to him that lapses in state computer services was an unacceptable hardship on our citizens and employees … I appreciate the company’s commitment to a full and comprehensive recovery from this system failure, and the agreement that Northrop Grumman would pay for the reasonable cost of the independent review that must take place immediately.”

In recent days, political leaders and editorial pages across Virginia have questioned why Virginia wasn’t getting a quicker response to the worst computer failure since the government hired Northrop Grumman in 2005, especially since better customer service was one of the benchmarks outlined in a revised contract announced in April.   

McDonnell said his administration, together with the Joint Legislative Audit and Review Committee (JLARC), will hire an outside vendor to assess what caused an unprecedented hardware failure. The crash knocked out computer service to 26 of 89 state agencies served by the Virginia Information Technologies Agency in a public/private arrangement with Northrop Grumman. 

In its own statement, Northrop Grumman said it “deeply regrets the disruption and inconvenience this has caused state agencies and Virginia citizens.”  The company said it supports McDonnell’s call for an independent review. “We will reimburse the commonwealth for the reasonable costs for an assessment as it is an essential and responsible measure that will strengthen our ability to protect against future issues,” said Linda A. Mills, president of Northrop Grumman’s Information Systems, a division located in Reston. 

Mills said Northrop Grumman employees had worked “tirelessly” in unison with state IT staffers to make repairs, which had been completed by Thursday. “We are diligently working through the lessons learned from this unfortunate incident and revising the plan to improve process and response time for restoring agency operations.”

To process a backlog of 35,000 to 45,000 license renewals that could not be handled during the service disruption, all of DMV’s 74 service centers will be open Saturday, from 8 a.m. until noon. On Sunday and Monday, 14 centers in select locations around the state will be open. Details on locations and hours can be found at http://www.dmvNOW.com

DMV centers also will offer extended hours the following weekend. The state pushed back the deadline for license renewal applications by an additional 20 days to help people whose licenses expired during the massive failure. 

What isn’t clear yet — and will be considered by the review —  is whether Northrop Grumman will have to pick up the tab for the lost time and productivity of state workers and agencies. Besides DMV, other affected agencies included the State Department of Taxation, which couldn’t process payments, and the State Board of Elections.
Sam Nixon, Virginia’s chief information officer, already has said that Northrop Grumman will be charged $100,000 in fines for the latest service problems.

Northrop Grumman is one of Virginia’s most high-profile corporate citizens. The country’s second largest defense contractor, it employs 40,000 workers in the Washington region, owns the Newport News Naval Shipyard — that city’s largest private employer — and recently announced the move of its corporate headquarters from Los Angeles to Fairfax County.  The move will bring 300 new, high-paying jobs. The company also contributes to Virginia’s political campaigns and gave $75,000 to McDonnell in his race for governor.

The computer outage began Aug. 25 with the failure of a data storage unit.  The unit was built by a Northrop Grumman subcontractor, Massachusetts-based EMC and reportedly incorporates a common type of technology used by many companies and governments across the country. 

The outage came four months after McDonnell announced a restructuring of the state’s controversial 10-year, $2.3 billion outsourcing contract with Northrop Grumman.
Before that, there was talk of scrapping the contract — a move that would have cost the state hundreds of millions of dollars — because of missed deadlines and poor service as NG worked to update and provide computer services in what was then the first-of-its-kind public/private IT partnership. 

Instead, the two parties renegotiated. Virginia agreed to extend the contract for three more years to 2019, incurring $105 million in new costs in exchange for a higher level of customer service.  Stacey Johnson, McDonnell’s press secretary, said the modification in April does not deal specifically with the type of audit that the independent vendor will conduct. However, the contract does contain various provisions about Virginia’s audit rights, she said. 

Three weeks after the new contract was made public, Northrop Grumman announced that it would relocate its headquarters to Virginia.

 


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