1 expect the best Agency Head and AITR Meeting February 16, 2006 Welcome The Honorable William H. Leighty Chief of Staff Office of Governor Timothy M. Kaine

2 expect the best Remarks The Honorable Aneesh Chopra Secretary of Technology Office of Governor Timothy M. Kaine

3 expect the best Lemuel C. Stewart, Jr. Chief Information Officer of the Commonwealth Agency Head and AITR Meeting February 16, 2006 VITA Update: Infrastructure Partnership Services and Rates Survey and Communications

4 expect the best VITA: The State’s IT Utility Formed by Governor and General Assembly in 2003 Primary responsibilities –Operate state’s IT infrastructure –Govern IT investments –Procure technology –E-911 and Virginia Geographic Information Network (VGIN) Structure –VITA is an Internal Service Fund agency* VITA’s budget is the fees it collects VITA’s rates are approved by ITIB and JLARC * Some general funds and E-911 fund –Information Technology Investment Board (ITIB), a 10 member supervisory board appointed by Governor and General Assembly, is responsible for VITA –ITIB hires the state’s Chief Information Officer under five-year contract to oversee VITA’s operation

5 expect the best VITA’s Responsibilities Operations: State’s IT infrastructure –State data center –Statewide telecommunications network (voice and data) –“In-scope” agencies’ servers, networks, desktops, peripherals Governance –Statewide IT strategic plans –Commonwealth IT policies, standards, guidelines –IT investment management Review and approval of agency IT plans Review and approval of IT projects/ procurements of $100k or more Ongoing oversight of major IT projects (>$1M, or mission critical, or enterprise) Project manager development program

6 expect the best VITA’s Responsibilities Procurement –Set statewide IT procurement policies, guidelines, procedures –Lead supplier selection and contracting –Develop innovative, strategic partnerships E-911 Virginia Geographic Information Network (VGIN)

7 expect the best VITA Operations at-a-Glance VITA is responsible for approximately 3,000 servers 57,000 desktops 1,500 locations 1,200 VITA staff $290 million annual budget 500 government customers –Executive branch –Localities –Other political subdivisions

8 expect the best Savings Report FY 04 SavingsFY 05 Savings FY 06 Estimated Savings Projected Cumulative Savings Cost Savings$15,858,000$29,544,000$26,000,000$71,402,000 Cost Avoidances $875,000$13,455,000$17,395,000$31,725,000 Total$16,733,000$42,999,000$43,395,000$103,127,000 Cost savings: a reduction in costs for which funds are currently budgeted Cost avoidance: actions to avoid higher costs in the future 52% of savings benefited non-executive branch agencies

9 expect the best Accomplishments To Date Created IT Utility Formed a new organization in four months Defined organization, services, and culture Consolidated Agency IT Resources Transitioned IT assets and support staff from 90 Executive Branch agencies in 18 months Met All Commitments Met all deadlines, promises, and commitments with no disruption of services, without start-up funding Launched Transformation Initiated efforts to truly transform service delivery in the Commonwealth by consolidating, standardizing, and leveraging a common infrastructure Complete?

10 expect the best Key Points to Start Transformation = Better Services The Commonwealth will get a 21 st century IT infrastructure for what it’s paying to maintain a 1980s IT infrastructure No Inflation VITA will not be seeking more appropriations than it receives today for the facilities, hardware, software, and services in question VITA Employees Treated Well It is our intent that reductions in VITA’s workforce will be accomplished through active management of attrition, retirement, retraining, and job placement

11 expect the best Transformation Outcome IT InvestmentPresent StateFuture State SecurityInadequateAdequate NetworkFragmentedIntegrated ServersNumerous locations, excess capacity (3,000+) Consolidated (<1,000) Computing environment InconsistentStandardized Help desk supportMultiple (70+)Combined (1) Service levelsUndefined performance, variable costs Defined performance, predictable costs PCsIncompatible, outdatedCompatible platforms, scheduled replacement

12 expect the best Transformation Outcome Agency Time and Energy Mainframes Servers Networks App. Dev. Business Process Re-engineering Desktop Computing Agency Time and Energy Mainframes Servers Networks App. Dev. Business Process Re-engineering Desktop Computing Present State Future State Source: Gartner

13 expect the best Infrastructure Partnership = Transformation What are the partnership highlights? $272 million total capital investment by Northrop Grumman Significant job creation –400+ jobs in southwest Virginia alone Excellent employment packages Consistent and proactive technology refresh New, state-of-the-art facilities in Chesterfield and Russell Counties Innovative and flexible service contract model A reliable and agile 21 st century infrastructure

14 expect the best Northrop Grumman Background One of the largest providers of IT services to the U.S Government Experienced systems integrator Largest technology/manufacturing private employer in Virginia Nearly 32,000 employees in 14 primary locations in Virginia Three of seven sectors are headquartered in Virginia: IT, Mission Systems, and Newport News

15 expect the best Employee Package VITA employees will receive a competitive employment offer from Northrop Grumman –Similar job requirements and responsibilities –Similar job location –Salary and benefits package that is comparable or better than Commonwealth Employees can choose to accept or remain Commonwealth employees –“Managed” employees who remain will receive technical direction from Northrop Grumman

16 expect the best Highlights of the Offers Employment guaranteed for first 12 months (except for “good cause”) Immediate 4% salary increase Signing bonus of up to 6% Immediate vesting in defined benefits plan/401k Service credit for all prior state service to determine eligibility for leave, disability, severance, retirement and health plans Free parking at new facilities and subsidized parking in current facilities and locations

17 expect the best Proposed Facilities Meadowville Enterprise Solutions Center –New, Tier III primary data center in Meadowville Technology Park, Chesterfield County –VITA Headquarters and Northrop Grumman Richmond Operations –Secondary Security Operations Center Southwest Enterprise Solutions Center –Back-up data center in Lebanon, Russell County –Enterprise help desk –Disaster recovery within 5-24 hours –Primary Security Operations Center Dinwiddie Project Support Center

18 expect the best

19 expect the best Meadowville Enterprise Solutions Center

20 expect the best Southwest Enterprise Solutions Center

21 expect the best Southwest Enterprise Solutions Center

22 expect the best Technical Highlights Enterprise Help Desk –Single point of contact for infrastructure help and service Hardware refresh –Three-year cycle: initial 80% - 100% refresh Security –Enterprise-wide security Networks –Enterprise voice and data network –100% network device refresh in years two and three Break/Fix Repair Messaging –Enterprise system

23 expect the best Value of the Agreement The proposed agreement is valued at $1.98 billion over 10 years, with one three-year extension Annual spending cap is $236 million If we did nothing, the Commonwealth would spend about $200 million more over the 10-year term –Duplicative, stove-piped infrastructure –Increased maintenance expenses –Inability to transform

24 expect the best Economic Development Highlights $38.3 million in total estimated economic benefits to the Commonwealth Southwest –Anchor tenant in Russell Regional Business Technology Park –$22.8 million capital investment; creation of 433 jobs –Approx. 90% of labor pool drawn from southwest –Support of technology education at UVa Wise Chesterfield –Meadowville Technology Park anchor tenant –$240 million capital investment; 631 VITA and Northrop Grumman employees Dinwiddie County –Project support center housing 34 employees

25 expect the best Risk Mitigation RiskMitigation Strategy Budget Minimum of 85% of total targeted baseline fees for any given year of contract Price fluctuation Benchmarking Most Favored Customer status Milestones/SchedulePayments tied to completion of milestones Service level performancePerformance penalty system Contractual performanceTermination and disentanglement Economic development $2.3 million penalty for failure to meet job creation targets, applied as credit to CoVA

26 expect the best Termination Rights CauseFees DefaultNo exit or resolution fees Lack of fundsNo exit or resolution fees Incurred liabilityNo exit or resolution fees Change in controlResolution fees only Force MajeurExit and resolution fees ConvenienceExit and resolution fees

27 expect the best Early Contract Termination Disentanglement –Up to 2.5 years to transition services to new provider or back to Commonwealth Smooth transition with no service interruption Ongoing use of assets –Broad perpetual license for proprietary technology, including free maintenance and upgrades for two years –Ability to make employment offers to vendor personnel responsible for terminated services –Rights to contracts used in the performance of services

28 expect the best Key Milestones MilestoneAnticipated Date General Assembly approval/public comment and transition planning Service Commencement + 6 months Move into new data centerMarch 2007 Establish single help deskMay 2007 Establish back-up data centerJune 2007 Complete initial desktop refreshNovember 2007 Complete single enterprise February 2009 Complete server consolidationFebruary 2009 Dates adjusted to incorporate General Assembly approval of capital lease component Subject to revision during interim phase/transition planning

29 expect the best What Does All This Mean for Our Constituents? Agencies –Improved 21st century technology services at today's cost –Improved security of Commonwealth assets –Consistent technology innovation –Improved disaster recovery –Lower reoccurring cost at end of the project Local governments –Leveraged state services at lower costs –Backup and security services that previously were unaffordable now are available –Expanded broadband access –Collaborative projects and services

30 expect the best What Does All This Mean for Our Constituents? Taxpayers –Improved security of information –Expanded, improved and simpler services –No additional taxpayer dollars –Economic development and new jobs Businesses –Continued opportunity to compete for Commonwealth business –Strong focus on SWAM business opportunities

31 expect the best How Will the Partnership be Managed? The Service Management Organization (SMO) within VITA will manage infrastructure service delivery –Single point of accountability –Ensures both partners fulfill contractual obligations Significant contract provisions to manage effectiveness of partnership Independent audits of expected outcomes Agency, local government and higher education focus groups, work groups and advisory committees

32 expect the best What Happens Now? Commence partnership preparation for transformation Final agreement reviews – General Assembly Project implementation plan for ITIB approval VITA internal organizational transformation The interim phase will become final upon the earlier of: –Completion of all General Assembly and other approvals –June 30, 2006, unless extended Commonwealth has the option to terminate with limited exposure

33 expect the best Memorandums of Understanding (MOUs) VITA will maintain governance and oversight of the IT Infrastructure Partnership Purpose of memorandums is to clarify roles and responsibilities (APA), establish performance metrics, and shift to service-based billing (JLARC) MOUs are the tool to document current service requirements and to manage and measure partnership performance Northrop Grumman obligated to comply with our MOU terms and conditions All of us have been working together since November

34 expect the best Memorandums of Understanding (MOUs) Move from direct bill plus to service-based billing –New model combines labor and non-labor components –Labor service billing effective March 1, 2006 Most agencies have signed MOUs –Working with others to finalize MOUs Will immediately begin working with you to establish non-labor component –Capacity vs. asset based –Non-labor service billing begins July 1, 2006

35 expect the best Services and Rates New Security and Project Management Services –General Assembly and JLARC directive –Security monthly fees and project management time and material project based –The administration is seeking general fund support for agencies in HB/SB 30 –Agencies and higher education –Effective June 1 Small Agency Start-up Funding –Equipment and technical support services –End June 30 - $500,000 annual subsidy –Have approached DPB for assistance

36 expect the best Customer Survey and Communication UVa Center for Survey Research –Technical services and support –Communication and business understanding –Surcharge fee –Governance – rules, policies, and service

37 expect the best Next Steps VITA organization restructure – April Survey Action Plan for ITIB approval – April Quarterly meetings and regular updates Focus groups and work groups Agency advisory committees (multiple levels) Annual independent survey – Fall FY06

38 expect the best For More Information on VITA Lemuel C. Stewart, Jr. CIO of the Commonwealth

39 expect the best Closing Remarks The Honorable William H. Leighty Chief of Staff Office of Governor Timothy M. Kaine