Virginia, Northrop Grumman Battle Over IT Contract Resembles 'Ugly Divorce'

The state is set on overhauling Virginia's IT strategy, and Northrop Grumman is saying publicly that the technology agency's plan is flawed.

by Travis Fain, Daily Press (Newport News, Va.) / September 13, 2016
Virginia CIO Nelson MoeNelson Moe/LinkedIn

(TNS) -- RICHMOND – The state's move away from a single massive IT contractor to a bunch of smaller deals is shaping up like a messy divorce, with lots of lawyers and arguments over money.

Virginia's IT arm, the Virginia Information Technologies Agency, has accused lead contractor Northrop Grumman five times this year of breach of contract. There's a nearly $10 million gap, and counting, between payments Northrop Grumman feels it's owed and what the state has been willing to pay.

Told all this Monday morning, legislators on a key oversight committee repeatedly asked VITA officials whether they have enough legal fire power cued up for a fight that seems destined for court.

The state's contract with Northrop Grumman is more than 10 years old, and this is far from the first time agency officials have complained about the company's IT services. But now, with the state set on overhauling Virginia's IT strategy, and Northrop Grumman saying publicly that VITA's plan is a flawed one with dangers for the taxpayer, state officials say the company's service is slipping.

"(It was) an awkward courtship," Del. John O'Bannon, R-Henrico, said of the contract Monday. "A short honeymoon, a rocky marriage, and now we're heading to an ugly divorce."

VITA sent Northrop Grumman a breach of contract notice in May, accusing the company of failing to save emails tied to an ongoing court case. Last month it sent four more breach letters for separate problems.

"Considered together ... this group of letters shows that Northrop Grumman's performance ... is very troubled in many areas," VITA head Nelson Moe wrote in a cover letter included with the August batch of correspondence.

The company's deadline to respond comes later this month, according to Moe, the state's chief information officer.

Metrics quoted in a Monday report to the General Assembly's audit and investigatory arm showed a significant increase in IT outages over the last two years, including eight outages that stopped work for at least one state agency in 2016. There's also a dispute over about $9.7 million in payments tied to cost increases that Northrop Grumman says flowed from subcontractor changes and increased the company's costs.

In an emailed statement Monday, Northrop Grumman spokesman Randy Belote said the company "continues to successfully perform to the terms of the VITA contract." He said the arrangement has produced 13 industry and national awards over the last three years and that Northrop Grumman's latest "service level agreement achievement score" was 99.28 percent.

Belote also said the company will "continue to work to support the Commonwealth in the disentanglement process," but he re-iterated that "the Commonwealth's current transition path creates undue risk and increased costs" and "poses significant risks to the quality and security of services provided to the citizens of the Commonwealth."

Northrop Grumman has been saying this for months, and it declined to bid on any of the smaller IT contracts the state plans to ink in the two years as it seeks a more agile way to provide computers, email and other technology services to state departments. The Northrop Grumman deal runs into 2019, a disconcertingly long period of time for officials who see the relationship deteriorating.

In January, Moe sent Northrop Grumman a letter that acknowledged the company was hitting a majority of agreed upon service levels, but he also complained of outages and a "perception of Northrop Grumman recalcitrance." Moe began his JLARC presentation Monday by reading an opening statement written in consultation with the Attorney General's Office.

During and after his presentation, Republican legislators on JLARC's oversight committee asked repeatedly whether VITA needs to hire outside attorneys with the expertise called for in for this case. As a group, the legislature's GOP majority has often taken a different tack: Criticizing Democratic Attorney General Mark Herring for spending millions on outside counsel.

Long-time lobbyists, who remember when the state inked the Northrop Grumman deal a decade ago, wondered Monday whether the state's legal fees in this dispute might eventually cost more than the payments Northrop Grumman demands, and several legislators said they hope the matter can be handled through mediation.

Other legislators noted that they've largely heard just one side of the story in this dispute: The state's.

Del. David Albo, an attorney by trade, said "all the cases sound like winners" the first time a potential client lays out their case.

"Northrop Grumman could very well have some good points," said Albo, R-Springfield.

©2016 the Daily Press (Newport News, Va.) Distributed by Tribune Content Agency, LLC.