Virginia Information Technologies Agency Contract Just Gets Worse

The latest Virginia Joint Legislative Audit and Review Commission audit report released Monday on the status of the Virginia Information Technologies Agency (VITA) 10-year, $2.4 billion outsourcing contract with Northrop Grumman shows that it just keeps going from bad to worse.

The report says that:

  • Northrop Grumman's transformation of infrastructure, contractually required to be complete by July 2009, many not be complete by the new deadline of July 2010;
     
  • Although Northrop Grumman services have benefited Virginia, many state agencies report some enterprise services are not meeting their agency-specific needs;
     
  • VITA and Northrop Grumman have disputed several sections of the contract, suggesting rights and responsibilities are unclear. Ongoing negotiations may increase costs, which may not satisfy all stakeholders.

Northrop Grumman proposed the July 2010 deadline in its get well plan presented to VITA in August.

VITA formally rejected the plan, but has had no objections to Northrop Grumman working to its proposed deadline. The reason for VITA's rejection was that four Virginia state agencies (Virginia State PoliceVirginia Department of Emergency Management, Virginia Department of Forensic Science, Virginia Department of Medical Assistance Services) are excluded from the transformation, and eight other agencies were not likely be completed by the deadline either.

Some get well plan, huh?

Northrop Grumman says in its defense that the four agencies above have unique requirements, and therefore their transformation requires more money than it was contracted for. The company also complains that these agencies have also resisted their transformation efforts (which was a very well-known and acknowledged risk before the contract was ever signed).

In addition, Northrop Grumman also claims that it has completed 94% of the transformation project tasks it was contracted for by last Friday. However, VITA says by its reckoning that the company has only completed 74%.

Northrop Grumman further says that it deserves an additional $32 to $42 million more per year on the contract, or an additional $217 million over the life of the contract because it underestimated the complexity of the transformation effort. The State says, too bad, that it isn't to blame for Northrop Grumman's poor due diligence.

Northrop Grumman now says it is willing to go to an arbitrator to sort the disagreement out, while the State is contemplating suing for breach of contract.

A decision by the State on what it will likely do will likely come by the end of the week.

The only good news is that Virginia's IT problems still don't put it in California's league.

You can read more about this saga here, here and here.

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