State, Northrop Grumman reach agreement on compensation for computer outage

Northrop Grumman will provide $4.748 million in financial compensation and operational improvements to the Commonwealth for losses from the computer outage last August that impacted several state agencies, including the Department of Motor Vehicles. In addition, Northrop Grumman has agreed to implement a corrective action plan that addresses the findings and recommendations in the independent third-party audit report.

“We are committed to holding all state contractors accountable for the performance of their duties on behalf of the Commonwealth and its citizens,” Gov. Bob McDonnell said in a statement Thursday. “Northrop Grumman will pay the full costs incurred by the state during last year’s outage. In addition, the company will pay to put in place new procedures and systems to ensure, to the greatest extent possible, that a similar outage does not occur in the future. The disruption of our state computer systems resulted in an unprecedented bipartisan effort between the legislative and executive branch to investigate the circumstances surrounding the outage and to hold Northrop Grumman accountable for the outage and to provide a path for obtaining compensation for the state’s expenses. This agreement brings closure to this incident, and provides the Commonwealth with an improved information technology infrastructure that will reliably support Virginia’s citizens and agencies in the years ahead.”

The financial package being provided by Northrop Grumman includes monthly invoice credits over the next 24 months totaling $1.908 million. This represents the entire amount of direct costs incurred by the Commonwealth as a result of the disruption.

Northrop Grumman also will expend $2.09 million making operational improvements to database backup, storage systems, system monitoring, database monitoring, network monitoring and capacity management.

Northrop Grumman also will implement and pay for “point in time” or “snap/clone” technology to protect the data held by the state, and will address additional recommendations made in the Agilysys review of the outage. These remedial actions are valued at approximately $750,000.

In addition, the company previously paid $250,000 for the cost of the independent third-party audit performed by Agilysys.

This brings the company’s total expenses to slightly under $5 million.

“I am satisfied that Northrop Grumman has been held accountable and that the Commonwealth has been made whole,” said Secretary of Technology Jim Duffey, who negotiated with Northrop Grumman on behalf of the Commonwealth. “This compensation package will benefit all agencies impacted by the outage and enhance the state’s information technology infrastructure.”