Change part of Northrop's growth strategy
Physical, internal shifts reflect company's emphasis on agility
A major change is in the works for defense giant Northrop Grumman Corp. In January, company officials announced they were moving their headquarters from Los Angeles, where the parent company was founded in 1939, to the Washington, D.C., area. In April, the company specified that Northern Virginia will be its future home.
The move is a logical and prudent step for the $34 billion government contractor, said Linda Mills, corporate vice president and president of Northrop Grumman Information Systems, one of five company units, along with Aerospace, Electronics, Shipbuilding and Technical Services.
“Personally, I’m very excited about the move," Mills said. "It will be wonderful for our customers and wonderful for Northrop Grumman. Many of our customers are" in the Washington metropolitan area.
The physical relocation is emblematic of other changes at Northrop Grumman, which has been restructuring its operations to align with the Obama administration's priorities and adapt to a challenging economic climate.
Mills’ unit consolidated of the company's Information Technology and Missions Systems units last year and helped land Northrop Grumman at No. 2 on the Top 100, with $11.1 billion in prime contracts during fiscal 2009.
“The reception has been extremely enthusiastic. Our clients appreciate a single point of contact, and there are cross-synergies,” Mills said. “We have become more cost-effective, streamlining indirect staff and investing in technology.”
Northrop Grumman's realignment also reflects the political change in priorities at the White House and Congress, which are increasingly focusing on energy, health care, technology and cybersecurity, in addition to counterterrorism and military activity in Afghanistan. Northrop Grumman has maintained expertise in those areas and has been strengthening its offerings, Mills said.
“With every change of administration, priorities shift, and you shift accordingly,” she added.
The Defense Department maintains a need for urgent support for warfighters, and President Barack Obama continues to emphasize cybersecurity and national security, so Northrop Grumman stands to benefit from its technological advantage in those areas, Mills said.
Additionally, Northrop Grumman’s government clients “are very passionate about health IT, immigration reform and public safety,” she added. “Those are all areas in which we have expertise.”
Meanwhile, the Obama administration’s drive to achieve procurement reform, accountability and transparency is motivating other modifications. In November 2009, Northrop divested its TASC Inc. advisory services business. The sale was facilitated, in part, by stricter government rules against organizational conflicts of interest, Mills said.
Another change is that the federal government has been moving away from the request for proposals contracting system to the indefinite-delivery, indefinite-quantity contracting model.
“Government traditionally has contracted with RFPs," Mills said. "It was the system, and everyone knows how it worked. Now we have IDIQ contracts, with quicker turnaround on task orders. About 25 percent to 30 percent of this business is now IDIQ contracts.”
For example, requirements for warfighter support are being developed in the theater in IDIQ contracts. “It is a slightly different system," Mills said. "We have to have more agility and understanding.”
That holds true throughout Northrop Grumman's business strategy.
“We have been becoming leaner and more agile," Mills said. "That requires more technology investment, and figuring out which technologies will be important in the future.”