Now, the marriage is really over between Virginia and Northrop Grumman.
The Fairfax-based technology company and the Virginia Information Technologies Agency announced Friday that they have settled their dueling lawsuits over the early end of the state’s 13-year, $2.4 billion contract for government information technology and services.
Under the agreement, Virginia will pay Northrop Grumman $35.8 million, about half of the $72 million the company had said it was owed in fees for the state’s decision to end the contract almost a year early. The settlement also requires the state to release $4.2 million in fees it had withheld for mainframe computer service during the legal battle.
The legal settlement ends the Comprehensive Infrastructure Agreement the state and company signed in 2005, releases claims and declares “the parties shall have no further obligations whatsoever to each other” under the voided contract.
“The resolution brings closure to a long-running, costly, and burdensome dispute so VITA can focus on its primary mission: serving state agencies so they can serve the citizens and businesses of Virginia,” Commonwealth Chief Information Officer Nelson Moe said in a release. “We are pleased this dispute is behind us.”
Northrop Grumman and VITA filed lawsuits against each other 2½ years ago in Richmond Circuit Court, each alleging that the other had violated the agreement between them.
“Northrop Grumman is pleased to have resolved its legal dispute with VITA and the commonwealth of Virginia,” spokesman Tim Paynter said, “and we are proud of our award-winning work on behalf of the commonwealth and its citizens over the past 13 years.”
The state will pay for the $40 million legal settlement from a $165 million line of credit for VITA’s costs of disentangling from the Northrop Grumman agreement before its scheduled expiration next June. The line of credit increased from $75 million so the agency could make a one-time $68 million payment to the company for assets it had provided to serve state agencies under the contract.
Moe told legislators in October that the agency will repay the debt with savings from the state’s new system of multiple vendors to provide information services instead of one.
The new system began operating on Aug. 18, when Northrop Grumman ceased to provide services and Science Applications International Corp., or SAIC, began coordinating services from multiple vendors for a four-month transition.
The final transition to seven new service vendors is scheduled on Saturday, while SAIC will assume its permanent role as “multisourcing service integrator” on March 1.
Northrop Grumman began operating the state’s information technology system in June 2006, under a 10-year contract signed the previous year under then-Gov. Mark Warner. In 2010, the state signed a three-year extension under then-Gov. Bob McDonnell.
The extension was scheduled to expire, but VITA announced in 2016 that it would terminate the agreement early and transition to a new system of service vendors over the next two years. Northrop Grumman declined to bid on any of the contracts and warned that the state’s strategy posed operational and financial risks.