the 2003 General Assembly session, I think it was, I was
standing in the foyer of the 9th Street Office Building
and chatting with Paul Goldman, who was writing for Bacon’s
Rebellion at the time. Up walked Eugene Huang. With
great passion, the then-Deputy Secretary of Technology
urged Goldman, a former Democratic Party chairman, to
use his influence with some Democratic legislator or
another to support the consolidation of all state
information technology functions into a unified Virginia
Information Technology Agency.
state budget was under considerable stress back then,
and Huang emphasized the cost savings – tens of
millions of dollars per year -- that consolidation could
generate. Huang’s sales pitch for VITA made quite an
impression upon me at the time. Wouldn’t it be great,
I thought, if Virginia really could achieve the kind of
budgetary savings that Huang was talking about? Maybe
that would relieve the pressure for tax increases!
General Assembly did approve the VITA proposal, and the
Warner administration continued touting the
consolidation as a money-saver for a while. As a 2003
fact sheet from the Governor’s Office stated, “The
initial stages of this reform will cost approximately
$14 million. However, this initial investment will
generate more than $37 million in savings [in 2004],
leading to net savings of more than $23 million in
Fiscal Year 2004." Elsewhere, Secretary of
Technology George Newstrom claimed that VITA would save
Virginia taxpayers "a minimum of $100 million"
2005 has come and nearly gone. The Governor's publicity
apparatus has been strangely silent regarding the
subject of VITA cost savings. But, surely, inquiring
minds would want to know if the Warner administration's
claims have withstood the test of time. Has Virginia, recognized earlier this year as the Best
Managed state in the nation, saved as much money through its IT
reforms as it forecast it would?
answer, coming from Eugene Huang, who succeeded Newstrom as Secretary of
Technology last year: The state has saved
about $50 million, accumulated over the life of VITA so
That's half the $100 million that Newstrom had
promised. And it includes both hard savings and
"avoided costs." Avoided
costs? Those aren't savings in the traditional sense of
the word -- funds that the state actually cut from its
baseline budget. They represent money saved from new
spending initiatives added to the base. And therein lies
a great untold story...
than viewing VITA reform as a mechanism for reducing
spending, as it was originally billed, the Warner
administration now appears to regard VITA primarily as a mechanism to build
a higher quality IT system. There are important
benefits to be sure: The new system will be more secure, provide
business continuity in the event of
disasters, and support a more mobile state workforce --
all attributes that any private business would insist
upon, and ones that voters would expect from a government
equipped to function in the 21st-century.
massive surpluses pouring into the state
Treasury, it appears that the impetus for cost-cutting
reform has run its course in Virginia. The priority now
is building a superior IT infrastructure. In a few
years, the Old Dominion may be able to boast of the best state
IT system in the country. Whether the phrase
"gold plated" applies is a matter that I'll leave to the
and I met for coffee one morning two weeks ago. My main
purpose was to get his take on the huge Northrop Grumman
contract -- $2 billion over 10 years to maintain the
state's telecommunications and information technology
infrastructure -- that the state had recently announced.
The conversation meandered into an overview of VITA
reform and the difficulty of calculating how much money
had been "saved" so far.
is what Huang had to say.
Gov. Warner stepped into office four years ago, he said
he wanted to bring the best practices of business to the
government. IT reform was at the top of the list. Huang
is proud of the administration's record of achievement.
"I honestly think these changes will end up
benefiting not only Gov.-elect Kaine," he said,
"but future administrations for years to
early success of IT reform -- an outgrowth of the
Gilmore administration, incidentally -- made quite an
impression on the Warner team. The executive branch had
gone to the General Assembly three times for funds to
upgrade the Department of Taxation's aging computer
system, Huang said, but legislators balked at the $100
million price tag. AMS proposed forming a public-private
partnership, funding the entire up-front cost out of its
own pocket, and charging the state a fee. The state
would more than make up that fee through enhanced tax
worked. In one instance of how the program exceeded
expectations, the state had projected that a tax amnesty
program would bring in $45 million, Huang said.
"Thanks to new tools that AMS brought online, like
data mining techniques that targeted specific
individuals and corporations, [tax amnesty] brought in
AMS-Taxation success story suggested a way to accelerate
the modernization of the rest of the state IT system.
Consolidating all IT functions into a single agency,
VITA, was only the first step.
In theory, VITA would
eliminate redundant IT capabilities in dozens of
different state departments and agencies, making it
possible to deploy manpower more efficiently and to
negotiate for better terms when purchasing hardware and
telecom services. But it still was difficult prying
funds out of the General Assembly to invest in upgrading
capabilities. Said Huang: "We've never had, and
probably never will have, the [legislative] funding to
modernize the state's IT infrastructure to make it
responsive to a 21st-century government business."
partnerships allow the private sector to raise funds
outside the normal budget process and invest in public
improvements without an immediate payback. For instance,
said Huang, the state needs to think about protecting
itself against a catastrophic failure of its IT system,
without which the bureaucracy would largely cease to
years, even before the 9/11 terror attacks, the state's
data center in downtown Richmond was regarded as a
security risk. "You could drive up a truck loaded
with fertilizer and take out 95 percent of the
Commonwealth's secured data," Huang said. "We
could never do anything about it. Right now, our backup
is sending our [data] tapes to SunGuard. They promise 48
hours [recovery]. I'm not holding my breath."
issue is business continuity, highlighted not only by
the 9/11 terror attacks but a succession of natural
disasters including the recent hurricanes in Louisiana
Even if the data is safe, it doesn't do much good if
state employees can't access their computers. "What
if there were an anthrax attack in the old Finance
building?" Huang asked. Could state employees
perform their jobs?
Right now, the infrastructure does not exist for state
employees to carry on the business of government. The
Commonwealth needs to build the infrastructure -- to
make data Web accessible, equip employees with laptops,
set up Wi-Fi access points, put different departmental
systems on common platforms -- that would allow state
workers to operate at different locations.
cited other issues, such as system reliability.
Employees in a 21st-century organization count on their
cell phones and Internet access to have 99.9 percent
uptime. But that, too, costs money.
its 10-year contract with the state, Northrop Grumman
will finance the massive up-front improvements to the IT
infrastructure that the state could never afford to
undertake on its own. The $2 billion covers the telecom
contract, servers, work stations, notebook computers,
mobile devices, maintenance and state-of-the-art
security with redundant data storage.
Huang's way of thinking, it is imperative that the
Commonwealth move to a more robust, more secure IT
system. Yes, it may be more expensive than a system
without those safeguards, he said, but it will protect against
catastrophic failure. "Is not doing security
an option?" he asks. "Is not doing back-up an option?"
what about the promised savings?
insists that VITA has saved money, and it would have
saved more if the General Assembly had been more
both the 2003 and 2004 sessions of the General Assembly,
the Governor requested start-up funding to launch some
of the cost savings initiatives planned early on. In
2003, the legislature eliminated a $30 million line of
credit for VITA that was targeted for specific
cost-savings initiatives, Huang explained. A year later,
the Governor asked for $7.3 million for e-mail
consolidation and other programs, but the General
Assembly turned him down again. Said Huang: "The
General Assembly, through its actions, told us, 'We like
the savings numbers, but we don't want to provide
funding to get there.'"
original $100 million in savings that Newstrom forecast
back in 2003 "was based upon the IT reform plan as
originally conceived," Huang insisted. "We've
saved money - to the tune of approximately $50 million
-- but haven't yet hit our original target due to
circumstances beyond our control."
$50 million in savings is one thing, but proving it is
quite another, as Huang readily conceded. When VITA saves money, part of the
savings appears as free-up resources in agency budgets,
he explained. "Agencies don't like talking about
these savings, because they represent resources they can
apply elsewhere." The IT efficiencies are real --
they just don't get converted into direct monetary
savings for taxpayers.
an ideal world, VITA would have a centralized budget
that would show where all the savings occur and how much
it all adds up to. But that's not possible. Because so
many state agencies rely upon federal funds, they have
to be able to account for every dollar they spend. And
that includes IT. Agencies would cry foul, Huang said,
if VITA tried to claim the IT savings. Resolution of any
disagreements would get mired in a swamp of arcane
other type of savings is "avoided costs." If
the Commonwealth had to pay for all the upgrades to its
IT system that Northrop Grumman will put into place,
Huang said, "we'd have to spend an additional $240
million-plus." That $240 million was never in any
budget, so he can't claim it as hard savings. On the
other hand, there's real value in the contract that can't be
Huang's story, and he's sticking to it.
what I know about government, I find it entirely
plausible that the state was severely under-investing in
its IT infrastructure, particularly in the areas of
security and business continuity -- capabilities that
are chronically under-appreciated until something goes
wrong. In a post-9/11, post-Hurricane Katrina world, we
now know that catastrophic disasters can occur. We have
no excuse to fail to protect ourselves from them.
it also seems clear that taxpayers will never see the
cost savings promised from IT reform. The General
Assembly apparently doesn't like approving capital
spending projects for IT. Even when efficiencies occur,
state agencies, hiding behind a
veil of mind-numbingly complex accounting, claim them for their own
purposes. And with an infinite list of plausible IT
"needs," public-private partnerships tend to
be used to deliver higher levels of service rather than to
cut administrative expenses.
the promise of major IT savings appears unlikely to ever
materialize, Virginians can at least
console themselves that the IT system underpinning the state bureaucracy won't crash and burn.
November 28, 2005
VITA to Life,” Aug. 25, 2003:
Warner administration contends that the state can both
save money and make government more effective by
consolidating IT missions, eradicating duplication of
effort and better training employees to do their jobs.
VITA will centralize purchasing, implementing a
“seat management” system for maintaining PCs and
software. It will consolidate help desks. It will have
the authority to assign employees to projects that cut
across multiple agencies. By Newstrom’s
calculations, VITA will save
taxpayers a minimum of $100 million by 2005.