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Virginia Probes Outsourcing Deal, CIO Fired

The state's $2.3 billion contract with Northrop Grumman is under fire from legislators.

Virginia lawmakers plan to launch a formal investigation into the state's troubled $2.3 billion technology outsourcing deal with Northrop Grumman amid complaints about shoddy service and possible cost overruns.

State CIO Lemuel Stewart, who criticized Northrop in a recent presentation, has been relieved of his responsibilities. His duties have been assumed by Virginia Secretary of Technology Len Pomata. Virginia's Senate Budget Committee will launch its investigation on June 29.

Virginia handed the 10-year contract to Northrop Grumman in 2005. The agreement calls for Northrop to take over operation and maintenance of Virginia's mainframe, server, desktop, and network operations and roll out new applications designed to modernize the delivery of numerous services to Virginia residents.

The deal raised some eyebrows when it was announced, given that Northrop is known mostly as a defense specialist.

Complaints about Northrop's performance include allegations that the contractor has missed several key implementation milestones. Northrop Grumman is slated to fully takeover management of Virginia's IT operations on July 1. Under Stewart, the Virginia Information Technologies Agency "raised concerns about NG's ability to meet this and previous deadlines," Virginia's budget oversight agency said in a presentation to lawmakers Thursday.

Virginia's Joint Legislative Audit and Review Commission said Northrop is late on the implementation of a volume-based billing system, an inventory reconciliation system, and other projects. "Ongoing JLARC oversight of VITA's rates identified problems with data & concerns about NG's performance," JLARC officials said in a slide presentation to the state's Finance Committee.

Northrop Grumman officials maintain that the contract's vast scope means some problems are inevitable.

"The IT infrastructure partnership is a visionary, groundbreaking concept never undertaken before. The partnership is addressing much more than IT. It is helping Virginia foster significant organizational and cultural changes within state government to improve efficiency and service delivery," a company spokesperson said in an e-mail Friday.

"Managing these changes and gaining stakeholder buy-in is a challenge, as expected with an effort of this magnitude," the spokesperson said.

"Northrop Grumman is confident that we are delivering good value and best-of-class systems to the agencies and citizens of Virginia. We welcome the opportunity to address questions about our partnership with VITA," the spokesperson added.

The problems apparently led to Stewart's ouster as Virginia CIO. He was fired June 10 by Virginia's Information Technology Investment Board, which oversees VITA. In a June 11 letter to VITA staff, ITIB chairman James McGuirk said Stewart had "done a tremendous job for the Commonwealth in a difficult and challenging position."

McGuirk, who did not detail the reasons behind the termination, said Stewart would serve as a consultant to ITIB until his contract expires at the end of the year. In the same letter, McGuirk said Secretary of Technology Pomata would serve as interim CIO "effective immediately." Pomata was appointed secretary of technology earlier this month after former state tech chief Aneesh Chopra was named as the nation's first CTO by President Obama.

InformationWeek Analytics and have published an independent analysis of security outsourcing. Download the report here (registration required).

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