After nearly six months of "intense negotiations," Connecticut has terminated a tentative seven-year, $1.3 billion contract with the Herndon-based government services division of Electronic Data Systems Corp., the state announced yesterday.
Rock Regan, Connecticut's chief information officer, said the state spent "many late nights" with EDS officials in hopes of reaching an agreement on terms. But negotiations fell apart Monday night and both EDS and the state decided the risks associated with such a long-term contract ultimately outweighed the benefits, Regan said.
Regan said Connecticut will continue with its plans to become the first state to outsource its technology management. But instead of using a large company such as EDS, the state will use several smaller contractors, as well as state workers.
"We're very disappointed by this," said George Newstrom, head of EDS's Herndon division. "What we would've done for Connecticut is what we do best worldwide."
In December, EDS's Government Industry Group, which employs 4,000 people in the Washington area, was chosen over International Business Machines Corp. and Computer Sciences Corp. to take over the state government's electronic technology infrastructure -- including desktop computers, mainframes and telecommunications operations.
Financial analyst Bill Loomis of Legg Mason said the termination of the contract may actually prove to be a blessing for EDS.
"The way the contract was heading, it looked like their shares would've been lower for a while. It probably would've hurt more than it would've helped," he said. EDS shares rose $2.31 1/4 to close at $58.87 1/2 in trading on the New York Stock Exchange.