Tech system's issues to be fixed, officials say

RICHMOND

More than three years into a contract to overhaul the state's computer network, reviews of the partnership with the private company performing the job are anything but four-star ratings.

Plagued by missed deadlines and monetary disputes, the 10-year, $2 billion deal between Virginia and Northrop Grumman Corp. has become a public relations headache for the state.

Two surveys of workers at state agencies have yielded mixed reviews of the information technology transformation - in one, 39 percent of respondents said Virginia's current IT program is "less effective" now.

An inquiry into the deal has found erroneous billings, inventory discrepancies and delays.

For example, an audit found 360 instances of double billing for technology services since January at two government agencies sampled - the state departments of Motor Vehicles and Health. They amounted to $373,000 in extra charges.

Testifying before legislators Monday, James McGuirk II acknowledged problems with a deal now six months to a year behind schedule but said corrective actions are being taken.

"A contract of this size and this magnitude having issues and having problems is not unusual. Managing them is the trick," said McGuirk, chairman of the Information Technology Investment Board overseeing the state technology overhaul.

Signed in 2005, the deal with Northrop Grumman was heralded as a landmark public-private pact that would produce savings by outsourcing technology services.

The state's annual computer spending is capped at $236 million under terms of the deal, but savings have yet to materialize.

Northrop Grumman, a defense contractor that owns the Newport News shipyard, took the job of transforming the state's technology network.

The firm partners with the Virginia Information Technologies Agency, which functions as a go-between for state agencies on billing and other matters.

Aspects of that relationship came under scrutiny last month when the state's former chief information officer, Lemuel Stewart Jr., was removed from his job after he suggested withholding payment of a $14 million invoice from Northrop Grumman.

A $13.2 million payment was subsequently authorized by Technology Secretary Len Pomata, whose other roles as interim CIO and ITIB member have been criticized by some legislators as improperly overlapping.

Under mounting pressure, VITA officials have told Northrop Grumman to provide within 60 days a revised schedule detailing a plan to finish outstanding work.

"There was an optimistic view that we would be able to accomplish all of these things" in three years, Jorman Granger, a Northrop Grumman vice president, said Monday evening.

"And I think everyone, and I do mean everyone, misunderstood the complexities and scale associated with that."

Granger said Northrop Grumman is working with the state to revise the contract schedule and complete the technology upgrades.

Still, problems persist.

Another review showed that of 72 milestones in the contract, Northrop Grumman was late on 44 items, including 14 that were delinquent after deadline extensions.

The firm was early on 18 goals - though 11 would not have been early under the original timetable - and on time with 10 obligations.

The contract structure allows the state to assess financial penalties for missed deadlines and Northrop Grumman to collect "earn-backs" for finishing projects early, including those for which extensions were granted.

So, while Northrop Grumman has missed more deadlines than it made, the company has accrued more credits than penalties.

"Help me to understand the logic in granting a credit for an extended milestone," state Sen. Roscoe Reynolds, D-Henry, said at a subcommittee hearing Monday afternoon.

Julian Walker, (804) 697-1564, julian.walker@pilotonline.com