Northrop Might Wish It Had Not Won this Contract

(MoneyWatch)  Several years ago Senator Mark Warner (D-VA), who was governor at the time, decided to out-source the majority of the state's IT system. The goal was to save money and provide up-to-date equipment with little investment.
Northrop Grumman (NOC) got the contract. Among other things, the company was supposed to integrate the many different systems, databases and physical plants across state government. The contract was structured in such a way that most of the state's IT workers would have to leave civil service and move to Northrop Grumman.

Last October it was reported that the contract was facing serious problems: It was behind schedule and IT costs were rising, rather than falling. The state was in of bind as terminating the contract would have cost close to $300 million.

Right now, the contract is managed by a committee, appointed by the Governor and Legislature. This means that it is hard to get a consensus on what to do. Now the Virginia House and Senate are working on legislation to move control to the Governor. The idea is that direct executive control will allow the state to work more closely with Northrop Grumman to get things back on track.

This contract was a very aggressive attempt at out-sourcing. Not only did Virginia trust Northrop to integrate various computer systems, but also to manage the help desk and equipment as well. Normally services like this are broken up into smaller, more manageable contracts. It will have to be seen if the change in structure of the contract will help it get back on track. The state will also have a decision to make in 2015 or so when the contract ends and they either need to award another one or bring the work back into the government.