1. 1 expect the best www.vita.virginia.gov Lemuel C. Stewart, Jr. Chief Information Officer of the Commonwealth Senate Finance Subcommittee on General Government December 13, 2005 Infrastructure Partnership

2. 2 expect the best www.vita.virginia.gov What are the partnership highlights? $272 million total capital investment Job creation Excellent employment packages Extensive 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

3. 3 expect the best www.vita.virginia.gov Who is Northrop Grumman? One of the largest providers of IT services to the US 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

4. 4 expect the best www.vita.virginia.gov Why Northrop Grumman? Employees Defined benefit retirement plan “Day One” employer 401k contributions Flexibility in telework Cultural fit Financial Strong investment commitment to Virginia Technical 3-year overall PC refresh 24-hour electronic disaster recovery (vs. 72) In-state back-up Security Operations Center Use of COTS software (vs. proprietary) Economic Impact $25.4 million (over 10 years) 754 jobs

5. 5 expect the best www.vita.virginia.gov What is the employee package? VITA employees will receive a competitive employment offer from NG –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

6. 6 expect the best www.vita.virginia.gov What are the 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

7. 7 expect the best www.vita.virginia.gov When will offers be made? Employees will receive detailed information and invitations to participate in information sessions prior to offers Offers will be made after final approvals of the agreement (est. Spring 2006) Once an offer is made, employees will have up to 120 days to decide whether to accept Signing bonus incentives –6% of new salary if offer accepted within 30 days –4% of new salary if offer accepted within 60 days –2% of new salary if offer accepted within 90 days

8. 8 expect the best www.vita.virginia.gov What facilities are proposed? Meadowville Enterprise Solutions Center –New, Tier III primary data center in Meadowville Technology Park, Chesterfield County –VITA Headquarters & NG 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

9. 9 expect the best www.vita.virginia.gov

10. 10 expect the best www.vita.virginia.gov Meadowville Enterprise Solutions Center

11. 11 expect the best www.vita.virginia.gov Southwest Enterprise Solutions Center

12. 12 expect the best www.vita.virginia.gov Southwest Enterprise Solutions Center

13. 13 expect the best www.vita.virginia.gov What’s in the contract? Information Technology Services Agreement Statements of Work: Defining responsibilities of VITA & NG in service performance Service Level Agreements: Defining the performance standards NG must meet in providing services and the penalties for failures to do so Charges Schedule: Defining the charges VITA will pay NG for the services and how these charges are calculated Relationship: Documents defining how the VITA and NG relationship will be managed, e.g. Account governance, Reports, Key and Critical Personnel, Dispute Resolution Procedure Relationship: Documents defining how the VITA and NG relationship will be managed, e.g. Account governance, Reports, Key and Critical Personnel, Dispute Resolution Procedure Financial: Financial documentation defining invoicing, asset allocation, insurance, benchmarking, and termination fees Financial: Financial documentation defining invoicing, asset allocation, insurance, benchmarking, and termination fees Services & Technical: Documents including Service Towers, Transition and Transformation program plans, Existing In- flight Projects, Procedures Manual, Project Guidelines, Security Guidelines etc Services & Technical: Documents including Service Towers, Transition and Transformation program plans, Existing In- flight Projects, Procedures Manual, Project Guidelines, Security Guidelines etc Legal: Legal documentation, e.g. Who will receive the services, Contract Change Control, Managed Agreements etc Legal: Legal documentation, e.g. Who will receive the services, Contract Change Control, Managed Agreements etc

14. 14 expect the best www.vita.virginia.gov What are the technical highlights? Enterprise Help Desk –Single point of contact for infrastructure help and service Hardware refresh –Three-year cycle Security –Enterprise-wide security Networks –Enterprise voice and data network –100% network device refresh in years 2 & 3 Break/Fix Repair Messaging –Enterprise e-mail system –Support Blackberry enterprise server

15. 15 expect the best www.vita.virginia.gov What is the value of the agreement? The proposed agreement is valued at $1.98 billion over 10 years, with one 3- 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

16. 16 expect the best www.vita.virginia.gov What are the economic development highlights? $38.3 million in total estimated economic benefits to the Commonwealth Southwest –Russell Regional Business Technology Park anchor tenant –$22.8 million capital investment; creation of 433 jobs –Approx. 90% of labor pool drawn from southwest –Support of technology education at UVa Wise, including internships, student recruitment efforts, and a satellite office for the Russell facility Chesterfield –Meadowville Technology Park anchor tenant –$240 million capital investment; 631 VITA and Northrop Grumman employees Dinwiddie County –Project support center housing 34 employees

17. 17 expect the best www.vita.virginia.gov What does this partnership mean for IT businesses? Short-term: existing infrastructure contracts continue –Some contract rights will be assigned to NG –Statewide contracts retained by VITA and “shared” with NG Long-term: Northrop Grumman to assume infrastructure procurement responsibility for the partnership –May continue using existing contracts –May leverage its own supply base and contracts –VITA continues to offer statewide contracts VITA and NG will collaborate to optimize supply base Strong commitment to SWAM suppliers –5 SWAM partners in partnership agreement –Establish SWAM liaison to promote SWAM participation –Implement SWAM mentor-protégé program and suppliers

18. 18 expect the best www.vita.virginia.gov 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 –Service levels within each technical area –Penalties for missing service levels Help desk response time –Penalties for missing critical milestones Completion of the primary data center construction Independent audits of expected outcomes

19. 19 expect the best www.vita.virginia.gov VITA and Northrop Grumman Interface Map Lem Stewart CIO Fred Duball SMO Director Hugh Taylor Relationship Executive Joe Fay Relationship Manager VITA Northrop Grumman Leads the Executive relationship with NG Accountable for overall relationship including oversight and management day to day operations with NG Cheryl Clark Deputy CIO Ensures other Directorates provide appropriate support to SMO Sr. Transition & Transformation Manager Transition Management Manager Responsible for transition of infrastructure services and longer term transformation of each technical tower Steady State Service Delivery/ Operations Manager Service Delivery Sr. Manager Service Delivery Managers (Technical Towers) Service Delivery Managers (Technical Towers) Agency Service/ Performance Manager Agency Performance Sr. Manager Day to day operational relationship interface for service delivery Day to day operational relationship specific technical towers Ensures performance meets the Commonwealth’s requirements Strategy and Production Architecture Business & Finance Mgmt. (Pricing & Contracts) Strategy and Architecture Coordinator Commercial Management (Finance & Contracts) Sr. Manager Technology, Strategy and Architecture Directorate Ent. Portfolio, CRM, PIC, HR Directorates CRM, CSS, HR Directorates CRM, CSS. HR Directorates CRM, CSS, HR Directorates SCM, FMS, HR Directorates Coordination with Partner Architecture, technology & Innovation Shared and Sub Contracts, Pricing Governance and Negotiations with Partner ITIB

20. 20 expect the best www.vita.virginia.gov How will we mitigate risks? 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 credits system Contractual performanceTermination and disentanglement Economic development $2.3 million penalty for failure to meet job creation targets, applied as credit to CoVA

21. 21 expect the best www.vita.virginia.gov What are our termination rights and fees? 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

22. 22 expect the best www.vita.virginia.gov What if the contract is terminated early? 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 2 years –Ability to make employment offers to vendor personnel responsible for terminated services –Rights to contracts used in the performance of services

23. 23 expect the best www.vita.virginia.gov Begin Operational Responsibility Interim Agreement Work Plan December 14, 2005 Managed Services Pre-Award Phase Current Operations Phase Effective Date November 14, 2005 Service Commencement Date (SCD) July 1, 2006* Month 36 Month 25 Notice of Contract Approval from CIO When will the partnership be implemented? Start-up Phase “Transition Planning” Interim Agreement Transformation Phase ? Offer Letters to VITA Employees SCD – 1 month * July 1, 2006 is the scheduled SCD set forth in the CIA. As part of the Interim Phase process, this date may be changed by the parties

24. 24 expect the best www.vita.virginia.gov What are the key milestones? MilestoneAnticipated Date Complete transitionService 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 e-mailFebruary 2009 Complete server consolidationFebruary 2009 Dates Adjusted to Incorporate General Assembly Approval of Capital Lease Component Subject to Revision During Interim Phase/Transition Planning

25. 25 expect the best www.vita.virginia.gov What happens now? Commence partnership preparation for transformation Final agreement reviews 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 –Activities permitted by statute include project planning and development

26. 26 expect the best www.vita.virginia.gov Please welcome our partner Hugh E. Taylor President, Commercial, State and Local Solutions Northrop Grumman Information Technology

27. 27 expect the best www.vita.virginia.gov For More Information on VITA www.vita.virginia.gov Lemuel C. Stewart, Jr. CIO of the Commonwealth 804.343.9002 lem.stewart@vita.virginia.gov