Virginia audit blasts Northrop Grumman IT contract

By Anita Kumar and Rosalind S. Helderman
The Washington Post

RICHMOND

A scathing legislative audit released Tuesday shows Virginia's outsourcing of a massive $2 billion computer upgrade has been so troubled that core government services have been disrupted but that canceling the contract could cost the state hundreds of millions of dollars.

The problems have affected almost every state agency that uses a computer - a prison was left without inbound phone service for hours, the Virginia State Police in Newport News lost Internet access for more than three days, and computers in DMV offices crashed.

Northrop Grumman, the giant defense company, was awarded the contract, the largest of any kind in Virginia's history, because state officials thought it would provide the best value despite the business's lack of experience managing state computer and communication systems, according to the report by the Joint Legislative Audit and Review Commission.

Decisions made about the contract "cost the taxpayers a lot of money," House Majority Leader H. Morgan Griffith, R-Salem, said. "In these economic times, we don't have $30 to $40 million to be spending because a giant multinational corporation made mistakes."

Sam Abbate, vice president and program manager for Northrop Grumman, said he was optimistic that changes in the project would lead to improvements in the "unique partnership."

"This is an investment in the commonwealth of a very significant order," he said. "Throughout its life, it will improve services for the citizens of Virginia, without question."

Terminating the contract early could cost the state as much as $400 million and leave no one to manage its computer system.

The state looked for a private company to oversee its computer system in 2003 after a legislative review showed that its technology was out of date and increasingly expensive to maintain. Then-governor Mark Warner, now a U.S. senator, received approval to consolidate computer operations into one agency and overhauled the system to make it more efficient and less costly.

But the report shows that the troubled contract has led to years of finger-pointing, the firing of employees, violations of the state's open meetings law, and crucial decisions made by only a few people.

The report found that a convoluted governance structure in which an independent board - not the governor or the General Assembly - was put in charge of the state's technology agency led to confusion and a lack of oversight. Northrop Grumman was chosen by a 16-member committee that included two board members and state officials.

That board fired Chief Information Officer Lemuel C. Stewart Jr. after he tried to stop a $14 million payment to Northrop Grumman. Two other high-ranking employees at the Virginia Information Technologies Agency were removed by Stewart's successor.

The report recommended that Democratic Gov. Timothy Kaine be placed in charge of the agency.

Problems in the 10-year contract, meant to be a model for the nation, put a stain on a state accustomed to accolades for management and raises questions about how to make outsourcing work for government.

"This is a cautionary tale on what can happen with public-private partnerships," State Sen. Janet Howell, D-Fairfax County, said. "The lesson is be very cautious - and don't be the first state to do it."

Frustrated legislators who serve on the commission heard details of the audit at a meeting Tuesday on Capitol Square. Both chambers of the legislature have begun investigations into the contract.