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TMCNet:  McAuliffe faces big decisions on state IT services [Richmond Times-Dispatch, Va. :: ]

[February 06, 2014]

McAuliffe faces big decisions on state IT services [Richmond Times-Dispatch, Va. :: ]

(Richmond Times-Dispatch (VA) Via Acquire Media NewsEdge) Feb. 07--Like his predecessor, Gov. Terry McAuliffe enters office with major decisions on his doorstep about the future of the state's massive IT infrastructure.

The state's 13-year contract with Northrop Grumman effectively ends in 2019, but pivotal choices must be made in the next four years about the future of the state's IT services, including whether to continue outsourcing.

The decisions are complicated and costly -- and the head of the Virginia Information Technologies Agency is laying them out for lawmakers.

Virginia's Chief Information Officer Sam Nixon briefed members of a Senate Finance subcommittee on Tuesday about what lies ahead.

The contract ends on July 1, 2019 and the state has the option to extend to Dec. 28, 2019. Far ahead of that, VITA anticipates that "most of the key policy decisions" will need to be made during the McAuliffe administration.

In a report filed with the legislature's money committees, VITA lays out questions to answer by the end of 2015 to have enough time for transition planning and action.

To assist in the preparations, then-Gov. Bob McDonnell left $2.2 million in his outgoing two-year budget for VITA to hire a consultant.

Like the IT network that covers the state's executive branch agencies, the decisions are extensive.

As Nixon told lawmakers this week, Northrop Grumman owns virtually all of the physical assets -- the data center, the storage, the network, the servers, the disaster recovery center.

The state could contract with a private company as it does now for the hardware and data centers, bring it all back in-house, or choose a hybrid.

Bringing all or part of the infrastructure back in-house could require buying hardware and finding a data center.

Purchasing the main data center in Chesterfield County, a nearly 200,000-square foot facility on 27 acres, as well as the hardware used by state agencies, would exceed $85 million at the end of the contract -- significantly more if purchased before 2018.


That doesn't include rebuilding the state's IT staff. In 2006, more than 550 state IT workers became employees of Northrop Grumman, which has about 580 employees and contractors supporting VITA, according to VITA's report.

Using rough numbers on the average state worker salary of $44,149, the state would shell out at least $24 million plus benefits for 550 people, but the skills and experience of some workers could drive the cumulative cost higher.

"We all have a vested interest in having as much runway, as much planning time as possible," Nixon told the panel Tuesday. "We believe those key decisions need and ought to be made by the next calendar year, 2015." Most of the decisions will need to be made during McAuliffe's administration, but most of the execution will occur at the end of his administration through that of the next governor.

"So this is a multi-administration timeline that we're talking about," he said.

*** Should the state opt for another privatization deal, it would have the benefit of past experience. The project began three administrations ago, under then-Gov. Mark R. Warner and has required the attention of every governor since.

Virginia entered into a 10-year, $2.3 billion contract with Northrop Grumman in 2005 in what was then the state's richest-ever privatization deal. The project has been plagued at times by rocky relationships and spotty service, which reached an apex in August 2010, when a computer meltdown affected 26 of 89 executive branch agencies.

In April 2010, VITA and Northrop Grumman agreed to a contract extension that stretched an additional three years. Nixon was installed early in McDonnell's term and in recent years things seemed to calm at VITA.

But three agencies still have not switched to the standardized network and are paying steep legacy fees.

Since VITA first levied the fees in February 2011 for costs associated with not yet switching to the standard network, seven agencies have spent $6.8 million -- 62 percent of it by the three remaining agencies.

Those agencies -- Virginia State Police, the Virginia Employment Commission and the Virginia Department of Emergency Management -- are continuing to incur monthly fees. And, VITA points out, they are operating at an elevated security risk until they complete transformation.

Further, the state has not "benchmarked" -- the process outlined in the contract through which the state can make sure that the fees it's paying to Northrop Grumman are still competitive.

Nixon said that Northrop Grumman at VITA's request conducted a market analysis using San Diego County's contract with Hewlett-Packard and the state of Georgia's with IBM for comparison. The analysis showed that about two-thirds of the prices Virginia is paying are less than what Georgia and San Diego pay for comparable services and about one-third are more. VITA and Northrop Grumman staff have some disagreements on the base assumptions, however, Nixon said.

"Northrop Grumman, with the support of a qualified third party, worked extensively with VITA leadership over the past several months to provide a detailed analysis of services to the commonwealth compared to programs most similar to the one here in Virginia," Northrop Grumman spokesman Matthew McQueen said in a statement.

"We will continue to assist CIO Nixon and his team as they evaluate future options for the commonwealth regarding IT infrastructure services." VITA could seek to hire a third party to assist with benchmarking but it's not guaranteed it would save money in the end. VITA plans to work with the Secretary of Technology on what's next.

Amid it all, VITA's management structure is getting a closer look as the legislature's watchdog arm undertakes a study to see if the CIO has enough authority to fulfill his responsibilities.

Karen Jackson, McAuliffe's nominee for Secretary of Technology, who served as deputy secretary of technology under the two previous governors, told a House committee in January that VITA is in a stronger and more solid position than in the past.

She noted that VITA is still working to transform the three remaining agencies, which have unique challenges. She also forecast the work ahead.

"We feel it's incumbent on us to spend time doing a lot of homework and studying and really understanding how we want to compete this contract the next time," she said.

"What we want to do with it, how do we want to do it, do we want to leave it as one big bundle, break it into pieces, those are all things that need to be determined during this four years." When the state in 2005 entered into the contract with Northrop Grumman, "there were a lot of unknowns" compared with now.

"If we don't do the homework that we need to do now to lead up to those decisions then it's on us if it doesn't go well the next time," Jackson said.

___ (c)2014 the Richmond Times-Dispatch (Richmond, Va.) Visit the Richmond Times-Dispatch (Richmond, Va.) at www.timesdispatch.com Distributed by MCT Information Services

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