State IT Debate: Virginia Must Move Quickly to Fix Problems
Published: August 9, 2009
WASHINGTON This has been the summer of discontent for the Virginia Information Technologies Agency (VITA) and its massively troubled $2 billion, 10-year information technology outsourcing deal with Northrop Grumman.
As
The Times-Dispatch has detailed in numerous articles over the past month, Virginia state government is receiving questionable benefits and incurring disturbingly high costs for a deal that was designed to transform its technology infrastructure.
Agencies and departments are frustrated with the loss of control of their information technology (IT) services, vacant promises, and the feeling of degraded services -- all with no apparent recourse. At the same time, efforts to resolve business issues are getting mired in contract performance issues and finger-pointing.
As someone who has analyzed hundreds of large-scale IT outsourcing contracts -- in both public and commercial sectors -- the problems that have arisen with Northrop Grumman do not surprise me. This is not an occurrence unique to the Commonwealth of Virginia and these problems can be resolved. Many organizations find themselves in this very situation early in the outsourcing lifecycle.
And as someone intimately familiar with the operations of Virginia's state government, I understand the ongoing tension between a desire to lead the nation in unique and ambitious uses of government resources while incurring the lowest possible cost to taxpayers.
Large scale public sector IT ventures always start off with the best of intentions and hope to achieve practicable business results. However, all too often, the vendor overpromises and underdelivers on its initial suite of services. The fundamental test of "IT service value" rests on the answers to two interrelated questions: "Do the services adequately meet the needs of the business units?" and "Is the price fair and reasonable for the level of service provided?"
Ideally, VITA would have looked at the marketplace before entering into a contract of this size. It's too late for that now and as reporter Jeff Schapiro noted in
The Times-Dispatch recently, junking the Northrop Grumman contract at this point is not a practical solution. The commonwealth would have to pay Northrop Grumman $474 million if it canceled after Dec. 31 -- and then taxpayers would be on the hook for whatever replacement contract was necessary to keep the state's IT infrastructure running.
But it's not a hopeless situation for VITA; nor is it too late to learn and adjust.
The commonwealth should look to see what other organizations -- of similar size, scope, and geographic footprint, be they commercial or public sector in nature -- have chosen to receive IT services on an outsourced basis and, once identified, determine how their current needs are being met at what price.
Once it knows where its stands, the commonwealth would be in a much better position to negotiate the path forward. The commonwealth must quickly determine the course of action to resolve these outstanding issues to ensure continuity of critical IT services. In that context, the front-of-mind questions for Virginia's officials are:
- What gaps exist between where Northrop Grumman promised it would be by this point of time and where it is?
- Are there ambiguities and/or shortcomings in the contract that are allowing performance issues to go unresolved?
- Is the governance model -- that is, the structure for managing the overall contractual relationship -- adequate so the organization may achieve its desired goals?
Virginia's taxpayers deserve answers to these questions -- but VITA also needs some detailed, practical analysis of the existing contract and some actionable recommendations, so that it can move quickly to repair the contract and get the most value.
It can't do this alone. VITA lacks the specific expertise and bandwidth to conduct a thorough mid-course contract review. I believe it's critical that VITA reach out for some expertise as quickly as possible.
These are the specific steps I believe that a reputable third party could do on VITA's behalf immediately:
(1) Assess the current service delivery situation against the agreed-to statement of work and the commonwealth's expectations.
(2) Conduct a comparative analysis of price and performance of Northrop Grumman-provided services against other commercial and public sector organizations of similar size, scope, and geographic footprint.
(3) Determine how the current contract stands up to industry best practices.
(4) Determine if the current the structure for managing the contractual relationship is sufficient and whether a solid set of guiding principles is in place for enterprise IT decision making.
The current situation is messy and, from all appearances, Virginia agencies and departments -- and the taxpayers that are funding them -- aren't getting the technology transformation they are paying for.
But with some unbiased, knowledgeable review, and some pointed recommendations, there's still time to make the Northrop Grumman contract work. But time is running short.
Glenn Davidson is the managing director of EquaTerra's public sector practice. EquaTerra helps commercial and government organizations improve the performance of their business support functions -- including information technology. Davidson also served in the administration of former Gov. L. Douglas Wilder first as director of the Virginia Liaison Office, later as press secretary and communications director, and finally as chief of staff. Contact him at 202-904-2310 or
.
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Reader Reactions
Notice that bboth sides are from non public service businesses. Where is the state side of the equation? Where is the article written by the state worker who has to put up with all this mess? Have another business perform a review of this contract? Is someone out of their mind. That would be throwing bad money after bad. Open the contract, sit down and line by line review it with agencies saying whether they have been provided the service stated in the contract, does the service work if not proxecute, if so then pay the bill. What is so hard with that idea. Simple basic contract performance, Did you accomplish what you were contracted to do? Yes or No? Very hard review and yes it is that simple. That is why the state has lawyers and accountants. Let them earn their money. No third party need apply
The Times-Dispatch has recently done great job exposing the problems with vita, the ITIB, and the Northrop Grumman contract. It’s sad the R-T-D couldn’t find someone to write a reasonable “con” side of the State IT debate.
Reading the self praise embedded in the column and the bio following, it seems Mr. Davidson’s objective was to lay out the reasons why his company should be hired to fix the State’s IT problems. That’s all we need; another contractor costing more taxpayer dollars telling the State what it should do! Would Mr. Davidson be willing to offer his company’s services pro bono?
Moreover, Mr. Davidson should not try to manipulate the words of Jeff Schapiro to promote his own agenda. Jeff Schapiro stated in his July 19 column, “An IT mess in 3 acts plays out,“ that “junking the contract may not be an option, if only because of expense.“ That seems vastly different than Mr. Davidson’s paraphrase “junking the Northrop Grumman contract at this point is not a practical solution.“ Where I come from, “may not” leaves room for thought; “is not” assumes a point in fact.
The mess does need to be fixed quickly but all alternatives need to be considered including the State again providing it’s own IT services. Contrary to the propaganda spread by the Warner administration and others, the State ran its own IT operations for many years successfully and efficiently!
RE: “Closing Gaps”
When Mr. Stewart arrived at VITA around February of 2004, VITA was in the process of determining rates and services for all agenices. Sound familiar? He put a stop to the MOU/rate charging because “Small agencies cannot afford to pay for the services large agencies will be needing and paying for.“
Now in August of 2009, based on Federal funding mandates, all agencies have to pay the same rate for the same service. What has changed in the affordability model since February/March of 2004? It can’t be the fact that NG has brought money in upfront. Last I checked they are a for-profit organization. NG has an expectation to make that money back and then some. This may not be the expectation of the Commonwealth who wanted to cap IT infrastructure costs and have a contractually obligated annual funding stream for IT.
I’m afraid this may be a gap that is too wide to build a bridge across.
It’s ridiculous to state that the Commonwealth has to pay $474 million to get out of this contract - that’s based on language in the contract that allows voluntary cancellation. NG is already in breach of the contract, as has been acknowledged. So the cost of any decision made at this point is completely negotiable.
The issues and complexities are not as easily resolved as Mr. Davidson seems to think. NG and VITA made some very critical mistakes early in the project, and as experienced IT project managers know, the longer bad decisions go unresolved, the more expensive they are to fix.
Perhaps more critically, the transformation process that NG is working to implement and the business needs of the state agencies are so far apart it’s difficult to see how to bridge the gap. And none of the “costs” that are being discussed and audited ever include the excessive amount of time that agency personnel are being asked to devote toward adjusting processes and systems to fit NG’s mandated structure.
If this project had been managed correctly, all of the best practices and efficient processes that agencies already had would have been used to design the “to-be” state, and the Commonwealth could have benefited from leveraging existing resources and expertise. Instead, NG seems stuck into some NIH syndrome, and are intent on shoehorning the state’s systems into their own, regardless of the impact to citizens and services.
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