Tag Archives: Collaboratoin

Contract Penalties do not solve Contracting Issues

For more than a week, three Virginia state agencies — the board of elections, the departments of motor vehicles and the department of taxation have been experiencing “…major computer issues that are hampering their daily operations…” as reported by Marcella Williamson, a spokeswoman for the Virginia Information Technologies Agency (VITA), which oversees the state’s computer network.

Unfortunately, this isn’t Virginia’s first major outage with their outsourcing partner – Northrop Grumman (NG).  In Oct 2009, a legislative audit highlighted deficiencies in planning, communications, and risk management, which lead to interruptions in government services and project delays and eventually contract amendments.

Read/Download the Report at http://jlarc.state.va.us/meetings/October09/VITA.pdf

Lessons learned during the audit include:

  • Vendor’s experience & understanding are key elements for success – success is enhanced when all parties fully understand the goals of the project & have demonstrated the ability to meet them
  • Partnership still requires experienced staff in the public entity
  • Partnership may not produce savings
  • Full & careful evaluation of proposals is critical

Outcomes of the audit included personnel and organizational changes along with contract amendments (see sidebar) – yet problems still exist.

SIDEBAR – Report of the Joint Legislative Audit and Review Commission To the Governor and The General Assembly of Virginia (SENATE DOCUMENT NO. 13 2010)

The most notable change was the elimination of the supervisory body charged with overseeing VITA, the Information Technology Investment Board, which was replaced with the Information Technology Advisory Council. In addition, the State’s Chief Information Officer (who serves as administrative head of VITA) will now be appointed by the Governor and report to the Secretary of Technology, instead of being appointed by and reporting to the Information Technology Investment Board. These actions are consistent with the recommendations made by JLARC staff in presentations to the Commission, the House Appropriations Committee, and the Senate Finance Committee in October 2009.

In addition, on March 30, 2010 VITA and NG signed contract amendments and agreed to implement operational improvements, which have the potential to address several findings in this report

Contracting Services

Contracting for service replacement is far different than purchasing technology through General Services.  Contracting for services requires:

  • An in-depth understanding of key processes and their success criteria (i.e., issuing new drivers licenses with a 0% defect rate in less than 60 min)
  • An understanding of the Enterprise Architecture behind key processes
  • A Portfolio & Project Management methodology that clarifies roles and responsibilities and prioritizes objectives while reducing risk
  • A Risk Management methodology

Unfortunately, Virginia’s focus on organizational changes and contract amendments were not enough to protect critical services from a devastating outage.  They are not alone in their challenges in contracting for IT Services.  Recently Texas announced their intent to rebid IBM’s data center contract and Marin Count recently sued Deloitte over the failed installation of their SAP ERP system.

Texas to rebid IBM’s data center contract – http://www.statesman.com/news/texas-politics/texas-to-rebid-ibms-data-center-contract-865050.html

Understanding Marin County’s $30 million ERP failure – http://www.zdnet.com/blog/projectfailures/understanding-marin-countys-30-million-erp-failure/10678?tag=nl.e539


These organizations made similar mistakes by contracting for services based on a favorable price, rather than strategic decision-making and organizational policies.  The cost savings only approach often leads to cost over-runs, missed expectations and litigation; whereas a collaborative approach focused on solving problems and improving operations, can elevate services and optimize business processes.