VITA deal depends on $20 million from state

The state's computer chief and beleaguered contractor Northrop Grumman have struck an informal deal on adjustments to information-technology services that hinge on a big if: an additional $20 million or more a year from taxpayers.

The pending agreement, outlined in proposed revisions to a contract that already is a year behind schedule and millions of dollars over budget, is before the attorney general's office as well as lawyers for Northrop Grumman.

"We believe we have an agreement," said George F. Coulter, head of the Virginia Information Technologies Agency. "It's just a matter of getting it down and then reviewing it with the stakeholders."

Northrop Grumman spokeswoman Christy Whitman declined comment.

An unknown in the agreement -- and a potential deal-killer -- is whether Northrop Grumman can exact from the state, which is struggling to erase a $4.2 billion budget shortfall, an additional $20 million or more annually for services that it says fall outside the contract. The company previously asked for up to $40 million.

Coulter said the payments would extend over several years, hinting that they may not begin until the state's budget stabilizes.

A decision on the payments ultimately could fall to lawmakers and Gov.-elect Bob McDonnell, who -- while pledging to set right the state's relationship with Northrop Grumman -- has collected more than $50,000 in contributions from the company and hopes to lure its corporate headquarters to Northern Virginia.

For months, legislators have balked at paying more to Northrop Grumman, particularly with the state preparing to implement a budget-balancing plan that is expected to include cuts to politically volatile services such as education and health.

Coulter, in an e-mail, declined to discuss details of the evolving settlement with Northrop Grumman, including cost.

Among the issues known to divide the state and the company are a precise outline of basic services and extras; and such pricey matters as data storage, backup communications networks, and disaster preparation and recovery.

A deal would come only weeks after Virginia surrendered what critics of Northrop Grumman viewed as the state's most potent weapon for bringing the company to heel: declaring by Dec. 27 that it would sever the state's largest-ever privatization contract, a 10-year deal for $2.3 billion.

On that date, under the contract, Virginia could have pulled the plug without facing potentially hundreds of millions of dollars in termination fees. The state still could do so, but not without paying penalties to Northrop Grumman and finding the cash to fashion an alternative information-technology system.

The state has declared the company in breach of contract, having failed to refit state agencies fully with new computers by June 30.

Northrop Grumman has been given another year to finish the job, but the breach declaration is seen by the company as a possible first step toward a full-blown lawsuit by the state.

On another issue, Coulter declined to answer questions on his future. He was hired in August to replace Chief Information Officer Lemuel C. "Lem" Stewart Jr., who was fired by VITA overseers after proposing to withhold a $14 million monthly payment to Northrop Grumman as punishment for continuing poor service.

"Such speculation is harmful to state IT and the agency at this critical point," Coulter said of his future. "I am here as CIO now at the will of the [VITA board] and will continue to do my best in this job."

The General Assembly, which opened its 2010 session yesterday, is expected to strengthen the governor's authority over VITA, Coulter's agency, by shifting from its oversight board to the chief executive the power to hire and fire its director.

The structural overhaul is expected to pass with few objections from lawmakers, who have been spurred by the findings of their own investigative agency.

The Joint Legislative Audit and Review Commission twice spotlighted the troubled relationship between the state and Northrop Grumman, citing managerial failures, weak cost controls, and poor communication.

Contact Olympia Meola at (804) 649-6812 or omeola@timesdispatch.com.

Contact Jeff E. Schapiro at (804) 649-6814 or jschapiro@timesdispatch.com.