Northrop could face penalties on Va. contract

Northrop Grumman Corp. could face as much as $5 million in penalties if the giant contractor fails by January 2011 to meet three new conditions negotiated with Virginia over its much disputed $2.3 billion statewide information technology contract, reports Jeff Schapiro at the Richmond Times-Dispatch.

A June 25 deadline to reach terms on the remaining details of the revised contract, which includes a three-year extension for the company that is worth another $236 million, was extended through June 28, the newspaper reported.

Samuel Nixon, Virginia's chief information officer and leader of the Virginia Information Technologies Agency (VITA), told the Times-Dispatch in an e-mail June 29 that “Northrop Grumman has agreed, among other things, to three new initiatives, including steps to settle billing disputes, handle work requests and manage the costs of storing government data,” Schapiro wrote.

Nixon said each initiative carries $500,000 in potential penalties, for a total $5 million, if Northrop Grumman does not implement them by Jan. 1, 2011.

“We are pleased with this mutual agreement, and we look forward to continuing to support VITA and the state agencies,” Northrop Grumman spokeswoman Christy Whitman told the newspaper in an e-mail message sent June 29.

On April 5, Virginia Gov. Bob McDonnell announced a successful conclusion to the contract modification talks that began during the previous administration of Gov. Tim Kaine.

When completed, the contract will establish a common communications network for state agencies. It also includes new hardware and services that Virginia will pay Northrop Grumman an estimated additional $105 million during the three-year extension.

Virginia Secretary of Technology Jim Duffey refuted suggestions in the press that Richmond’s agreement to the contract extension terms helped sway Northrop Grumman — already one of the largest employers in the state — into choosing Northern Virginia for its new headquarters.

That site has not been revealed yet.

Duffey told Washington Technology that McDonnell and Northrop Grumman Chief Executive Officer and President Wes Bush “were pretty conscientious about making sure that there were two separate teams working on those two issues. And they were fairly well firewalled.”

“Movement on one side had nothing to do with movement on the other,” he added.

Northrop Grumman, of Los Angeles, ranks No. 2 on Washington Technology’s 2010 Top 100 list of the largest federal government prime contractors.