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Nick Wakeman

Can Jim Duffey save Virginia's huge outsourcing contract?

As former EDS executive James Duffey prepares to become Virginia’s next secretary of technology, one big task looms ahead of him – getting the state’s outsourcing contract with Northrop Grumman back on track.

The $2 billion contract has missed deadlines and fallen well short of expectations. State auditors and the company have traded salvos over who carries the most blame.

The contract is so large and far-reaching – every state agency is supposed to turn over their IT infrastructure to Northrop – that cancelling the contract isn’t really an option.

So who better to face that challenge, or call it a mess, than Duffey?

He was part of EDS when the company turned around its own troubled outsourcing contract, the Navy-Marine Corps Intranet. NMCI has gone from being an albatross for the company to being a star.

EDS, now HP Enterprise Services, also manages other huge outsourcing contracts on the state and local level, particularly in the Medicaid and Medicare processing area.

Because Virginia can’t afford to fire Northrop Grumman, it has to help the contractor succeed, and Duffey knows very well what a contractor needs to succeed.

He faces two hurdles, though. First is getting the state legislature to give him the authority to directly manage the contract. Virginia, my beloved home state, has a screwy structure among its secretary of technology, chief information officer and the Virginia Information Technologies Agency. In an effort to remove politics from the CIO and VITA, the state created a structure where no one is really accountable.

I hope that will get fixed.

The second hurdle is that no one has pulled off a successful statewide outsourcing project.

Good luck, Mr. Duffey.

Coincidentally, Northrop Grumman is in the midst of moving its headquarters from California to the D.C. area. I'm not sure what role, if any, Duffey will have in trying to bring the company to Virginia for its corporate headquarters. Gov.-elect Bob McDonnell has pledged that he won’t let the wooing of Northrop Grumman to the commonwealth interfere with pressure on the company to perform better.

Posted by Nick Wakeman on Jan 06, 2010 at 7:23 PM


Reader Comments

Thu, Jan 7, 2010 Observer Jr

Duffey was insulated from much of the NMCI business strategy and also when NMCI became a multiyear disaster financially for EDS. The embarrassing contract was directed from outside his line of business and P&L. The contract is hardly "a star" for EDS/HP. On a cumulative basis, the net profit is miniscule and probably "managed" and by this time clouded by writeoffs, "investments" and the accounting changes following HP's acquisition. For all the revenue earned (that's not profit, most people understand), EDS, for a very long time, perhaps a decade, has severely damaged its reputation in all of DoD. Few were fired, but most miscreants who caused the disaster--at least the EDS part; the Navy contributed heavily, too--are gone. Re the Virginia disaster, are there any top government technology officials, or a US senator, or a recently retired governor who would know anything about how the contract got that way? How about some real investigative reporting--from state government sources, and from publicity-shy Northrop Grumman? The company's competitors can't say enough bad about it, not for attribution, of course.

Thu, Jan 7, 2010 Ba Virginia

Full disclosure: I once worked for pre-Northrop Grumman and have been sub to the combined firm as well. NG is a fine firm, but the contract--a top down, externally enforced consolidation based on central planning and contracting complexities--seems bound to fail, even if it meets some of its stated goals. In fact, success in public sector efforts at this level is almost always built from the bottom up, with agencies working out and agreeing to consensus in the ways they will achieve the interoperability that is, after all, the real goal. The role of the central hub agency is to keep the discourse moving in the right direction and to impose some pressures and penalties on agencies that refuse to participate. I have seen the mega-contract concept fail in a number of states and the federal environment, and I doubt that VA is an exception. Indeed, the VA public officials I have dealt with during the past few years run for the hills at the mere mention of the state's technology agency (VITA.) What is most tragic about this grodlock is the fact that in today's technology and information world, one need not impose uniformity from the top as might have been the case 20 years ago when just getting the boxes to light up was a challenge. In any case, I wish Duffey good luck... my state taxes helped pay for the chaos he will inherit.

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