Information Technology (IT) outsourcing is one of the bright spots in terms of privatization trends. As I note in Reason Foundation’s 2009 Annual Privatization Review (page 117),
Government IT outsourcing generates far less controversy than outsourcing and privatization initiatives in other areas, such as roads, prisons and airports. This is due to several factors. First, IT was never a “traditional” responsibility of government, the way other services supported by heavy infrastructure—transportation, utilities and schools—are perceived. Second, government IT operations are inwardly focused—they support the day-to-day processes of government departments and employees. Hence, politically, there’s no negative perception among voters that a “free” government service is being transferred to a corporation that will run it for profit. Quite the opposite: To the extent that the public sees a benefit from improved IT, it’s in the way they can handle their government business online. If anything, the private sector has raised constituents’ expectations about Web- and Internet-based applications such that frustrations will grow if people can’t find critical information, submit forms or make payments via the Web.
The APR, however, went to press just as news was breaking about the contoversy at the Virginia Information Technology Authority (VITA). This has been an unfortunate development, as Virginia was among the first states to launch a large-scale statewide IT outsourcing project aimed at consolidating and streamlining its many isolated information systems. Projects like these, although carry big price tags and can take five to ten yeasr to run their course, pay much more in dividends in terms of increased productivity, more efficient and economical use of IT assets, and far, far less redundancy in hardware and data.
While in Virginia there have been some serious problems with the deliverables, Gov. Tim Kaine’s decision to replace fire the state’s chief information officer and subsequent attempt to bring VITA under the control of his office was the wrong response and will likely prove counterproductive in the long term.
Virginia’s ten-year, $2.3 billion IT outsourcing contract with Northrop Grumman is highly visible and although he did not initiate the plan, Kaine, as governor, does have substantial political capital at stake in its success. However, despite the rhetoric and nomenclature one tends to see in press releases, the state of Virginia is Northrop Grumman’s customer, not its “partner.” So when state CIO Lemuel Stewart Jr. questioned a $14.3 million bill claiming that certain certain goals had not been met on time, Kaine should have backed Stewart, not sacked him. Worse, Kaine’s replaced Stewart with Leonard Pometa, a member of Kaine’s cabinet. The matter is that much more exacerbated by the fact that Northrop Grumman reportedly is a Kaine campaign contributor. All this has prompted the Virginia Assembly to begin an investigation into Stewart’s dismissal.
Now what had been a good plan, and an opportunity for Virginia to demonstrate leadership in the IT sphere, risks getting swamped in a sea of politics. The logical solution is for the governor’s office to step back and re-assert VITA’s independence and allow it to manage the state’s relationship with Northrop Grumman. This would mean hiring a new CIO with no ties to the executive mansion. Indeed, IT independence is crucial to the success of any IT outsourcing project because it serves as a buffer against the sort of conflicts of interest, or appearance of such, that arise as part of the campaign funding process.
The lesson other governors should take form this is to be a little less sensitive. No IT overhaul project goes smoothly. And one of the best talents a CIO can have is the ability to separate the run-of-the-mill grumbling that occurs when employees are forced to change their technology habits (you can see this reflected in a lot of Web comments to the various news articles that have run on the VITA controversy), with critical feedback as to whether the necessary changes are being implemented correctly and are delivering the increased productivity. In the private sector, large users have learned the only way to get what they want is to hold their contractors’ feet to the fire. And this sometimes means withholding payment. Kaine may yet regret coddling Northrop Grumman. He’s certainly not doing any favors for VITA nor the Virginia taxpayers of the state.
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