Bernie McVey

A central tenet in the business world is to ensure that operations are being conducting in the fastest, smartest possible way. Northrop Grumman is currently working to transform the internal IT environment “to create a more performance based culture in the company,” according to vice president and chief information officer Bernie McVey.

In 2009, McVey was placed in charge of Northrop Grumman’s information technology strategy. He believes that consolidating the IT environment will provide the company with a less expensive, more agile environment.

“[IT consolidation] will result in a more agile environment. A simplified environment is a more supportable environment,” he said.

While there are clear benefits to IT consolidation, challenges still remain in implementing changes.

“Change is very difficult,” McVey said. “We’ve done business in the IT space for quite a long time a certain way so getting people aligned with this change, having leadership to drive it and breaking down the barriers of the people who would like to continue business as usual.”

However, these obstacles are far from insurmountable. According to McVey, “We are making sure our entire leadership team is aware of and aligned with the vision and…the benefits of going in this direction.”

“It’s really all about alignment and leadership when you are talking about change. That’s really what we’re trying to accomplish,” he said.

So far, the efforts at Northrop Grumman have been largely met with approval by employees and the leadership. McVey has found an ally in the financial leadership of the company as well.

“I am very well aligned with the financial leadership of the company and that’s been very helpful in terms of some of the change that we are making. They understand the benefits so I’m actively seeking their support along with the sector Presidents,” he said.

In terms of timeframe, McVey is remaining flexible. “We are looking at this as a journey,” he said. “I set a three year timetable. We put together our plans around that type of a window.”

In the current business landscape, companies are continuing to explore ways to streamline operations and reduce costs while increasing efficiency. McVey advises other executives considering IT consolidation to communicate effectively and get leadership on board with the project.

“You need top-level support for the changes you want to make,” he said. “I think you need to communicate broadly and often about what you are trying to do and why.”

Secretary of Defense Robert Gates

During a town-hall style meeting with Air Force servicemen yesterday, Secretary of Defense Robert Gates commented on the recently-updated RFP for the Air Force’s next-generation refueling tanker, saying that the RFP was “fair” and expressing disappointment that Northrop Grumman Corporation has withdrawn from competition for the $35 billion contract.  He also expressed concern over the role of government contractors in the acquisition oversight process.

Earlier this week, Northrop Grumman Corporation announced that it would withdraw from the competition to build the KC-X tanker, leaving Boeing the probable winner.  Secretary Gates said, “I wish that we had had a competition; I wish that both companies had stayed in it.  I think the RFP that the Air Force sent out was fair and balanced and was based on Air Force requirements.”

He went on to say that the DoD will “certainly be sharpening our pencil when it comes to negotiating with Boeing,” and that he “[doesn’t] see any reason for this outcome to bring any further delays.”

Secretary Gates also expressed concern about inherently governmental work being done by contractors: “In contracting, we’re going to convert 10,000 acquisition jobs to permanent civil servants who belong to the Department of Defense, and are only looking out for the Department of Defense and not their home company.  Then we will add another 10,000 civil servants to that.”

Secretary Gates said that his plan was “not disparaging to contractors,” adding that “we need them, and we have an important partnership…but we kind of let it get out of control, in my view.  I think we’re beginning to get our arms around the problem by making better choices about what’s done by people in uniform, what’s done by career civil servants and what’s done by contractors.”

Former Secretary of Homeland Security Michael Chertoff

General Dynamics secured a deal to support the FAA’s FAVES program.

Northrop Grumman’s Paul K. Russell will lead their new space business unit.

ATMs are an inviting target for cyber criminals.

Michael Chertoff commented on the lessons learned from CyberShockwave.

The Zeus botnet has been disrupted by Spanish police.

The FDA wants regulation of online ads for prescription drugs.

The FCC is contemplating providing free wi-fi.

EPA Administrator Lisa Jackson says a clean environment can’t wait.

When Northrop Grumman pulled out of the $40 billion competition to build aerial refueling tankers for the Air Force, leaving Boeing as the likely winner, some analysts questioned whether White House acquisition reform efforts are pushing contractors too hard.

Loren Thompson of the Lexington Institute

Loren Thompson, a defense industry expert at the Lexington Institute, told the Washington Post “it shows how acquisition reform can backfire.  If you push a contractor too far, they don’t have any incentive to bid because they don’t expect to make any money.  The lesson is, if you push contractors too far, they’ll lose interest.”

EU Trade Commissioner Karel De Gucht

Some questioned whether the award was steered away from Northrop Grumman because of its partnership with Airbus, a subsidiary of Paris-based European Aeronautic Defense & Aerospace (EADS).  The EU’s Trade Commissioner Karel De Gucht said “It is highly regrettable that a major potential supplier would feel unable to bid for a contract of this type.  Open procurement markets guarantee better competition and better value for money for the taxpayer.”  An EU press release said, “The European Commission would be extremely concerned if it were to emerge that the terms of tender were such as to inhibit open competition for the contract.”

The contract was awarded to Northrop Grumman in 2008, but Boeing successfully protested the award, after which, the Air Force released new criteria for the tanker. Last December, Northrop Grumman/EADS expressed serious concerns to the Pentagon and the Air Force that the criteria for the project were slanted in favor of the Boeing design.  Last year, Northrop Grumman also expressed concern over detailed pricing data provided to Boeing.

Paul K. Meyer of Northrop Grumman

Paul K. Meyer, Northrop Grumman VP and general manager of its Advanced Technology and Programs Division, released this statement last September, “Northrop Grumman continues to be greatly concerned that its pricing information from the previous tanker competition was provided by the Government to its competitor, Boeing. Access to comparable pricing information from Boeing has thus far been denied by the Pentagon. With predominant emphasis placed on price in this tanker re-competition and Northrop Grumman again proposing its KC-45 refueling tanker, such competitive pricing information takes on even greater importance. It is fundamentally unfair, and distorts any new competition, to provide such critical information to only one of the bidders. The company will continue to work with its customer to fully resolve this issue.”

Sen. Richard Shebly (R-ALA)

Senator Richard Shelby of Alabama, where the Northrop Grumman/Airbus team would have built the tankers, told the Washington Post that the “so-called competition” was “structured to produce the best outcome for Boeing.”

Whether or not the competition was unfair, these allegations have serious implications for the White House’s efforts to reform the defense procurement process.

Present: Vice President of Health IT Programs, Northrop Grumman

Career history: Prior to joining Northrop Grumman in 2006, King spent nearly 10 years at CGI-AMS (formerly American Management Systems), her last role as vice president for federal healthcare. Prior to AMS, King served as a senior manager responsible for developing various systems at Department of Treasury, Immigration and Naturalization Services (INS), Department of State, General Services Administration, US Air Force, US Navy, and Defense Logistics Agency.

Personal: King is an avid golfer. “The game of golf teaches you that, while you may think you have it down pat, something comes up to surprise you … sort of what happens in life and healthcare!” says King.

TIPS

• Embrace open source. “I think that will really be a wave of the future; the proprietary nature of systems will become more obsolete. We recently re-won a program with the National Institutes of Health called the Bioinformatics Resource Center (BRC). This and other bioinformatics work is all open source,” says King.

• Wear two hats. “I recommend putting on two hats; one as a taxpayer wanting to make sure that the investment pays off, the other as an investment collaborator. We all have an important role to play and we’ve all got to work together. If we don’t, something will fall through the cracks.”

• Put yourself in the beneficiary’s shoes. “Whether the beneficiary is a veteran, military health personnel, or recipient of child support, it’s important to think through, from a business perspective, what can help meet a customer’s mission objectives.”

FULL INTERVIEW

ExecutiveBiz: You’ve personally been in the healthcare marketplace about eight years. What particular market challenges have you since seen along the way?

Amy King: The issue of interoperability — having to share not only data but systems — has evolved over the last eight years. In the past, you had so many more stovepipe systems; now there is an acknowledgment of the need to share data and systems for the overall benefit of the public. The Centers for Medicare & Medicaid Services is one example. CMS has gone from being just a payer, to implementing Medicare Part D, to potentially, now, having a big role with whatever is decided about extending health benefits.

ExecutiveBiz: Where are you seeing the greatest need for interoperability?

Amy King: Certainly, many people around the country have had a lot of challenges, financially, over the past year.  We support many state and local human services programs that are being pushed to the max. We do eligibility, child support, child welfare, food stamps, among others.  We consider that part of health; we see the whole umbrella of health and human services as a key component. We’re seeing states go to single eligibility systems for all of their programs. We’re seeing more cooperation and coordination among states around sharing of information and the participants in those services programs. We’ve helped them take care of the increased population of beneficiaries in those programs.

ExecutiveBiz: What healthcare IT markets will you be pursuing this year and beyond?

Amy King: We’re looking toward international public health IT opportunities. We’re expanding the scope of our public health practice to deal with the response to readily maturing needs in several countries, in areas such as population management and laboratory information systems.Another area we’re tracking is bio-threats to public health. We saw this issue arise with the H1N1 virus and, and a few years ago, with anthrax.  We’ll continue to develop tools to help our customers detect, analyze, and respond to these threats.

ExecutiveBiz: Where does healthcare reform fit into your market strategy?

Amy King: We’re continuing to strengthen our positions to support the emerging needs of healthcare reform. Our work at CMS, the Social Security Administration, and, then, in the states all give us an opportunity to offer solutions and help with the security aspects. I think security will be a real key factor in the years ahead as the data gets out into the public domain. We have to make sure that the privacy aspects of data is protected. Security, obviously, will play a key role there.

ExecutiveBiz: What is Northrop Grumman doing to strengthen cybersecurity as part of healthcare IT solutions?

Amy King: We have several IT labs set up to address some of the security threats, whether for the networks, data, or systems as a whole. We’re bringing some of our solutions from the intelligence community since they’ve had the most visible programs dealing with security. I’ve talked to a lot of our customers and there’s much more willingness to take solutions from the intelligence community because things like data mining and a lot of the security aspects are equally applicable. Why reinvent the wheel and spend precious dollars when there is a solution that can be applied to a health IT problem?

ExecutiveBiz: Where do you see contractors making the greatest contribution to healthcare reform?

Amy King: We see a future where health information technology (HIT) and health information exchange will become commonplace amongst healthcare providers over the next few years.  We were one of the original Nationwide Health Information Network (NHIN) contractors so we have a solution around that; we’re piloting and working with some of our customers and looking at the health information exchange opportunities in the states that are really going to play out in the next few years. You’re starting to see some of the ARRA funding go there.  I think health reform will only impact it even more. Quality and outcome metrics will become a part of HIE over the next several years so we’re looking at that. I would say that the speed and delivery and cost will be important, too, not only to the states, but also to the federal government. People will want to see their data and not have to have some of the challenges that they’ve had in the past.

ExecutiveBiz: What upcoming trends will Northrop Grumman be seizing in healthcare IT?

Amy King: One of the trends we’re seeing is the need to provide transparent data to the public. With all of our work, we’re seeing much more transparency. We’re seeing more portals. We’re seeing more easy access to the data. We’re seeing opportunities such as the Joint Virtual Lifetime Electronic Record (JVLER)between the Department of Veterans Affairs and Military Health. This effort is  a continuation — and an acceleration — of what has been done in the past. With the widespread use of electronic health records and the commitment to improvements and outcomes in health, I think this is going to be an exciting time.

Resupplying combat troops in Afghanistan is a dangerous, slow and increasingly expensive undertaking.  Moving a truck filled with supplies 50 miles could require as many as 100 Marines, most of them to provide security, and take about 24 hours, according to DefenseNews.

Of course, it’s a lot faster to deliver supplies by helicopter, but that costs almost $10,000 per hour and puts airmen and helicopters at risk.  Airdrops by fixed-wing aircraft are safer, but much less accurate and just as expensive.

What’s a soldier to do? Employ UAVs, say Lockheed Martin, Northrop Grumman and Sikorsky.

Each firm is developing an unmanned supply helicopter that would reduce the cost of ferrying supplies to ground troops in combat zones and reduce our troops’ exposure to deadly improvised explosive devices (IEDs) and ambushes.

Lockheed Martin and partner Kaman Aerospace are working on an unmanned version of the Kaman K-MAX helicopter that is designed to carry up to 6,000 pounds, fly to a delivery point, unload and fly back, all without intervention by a human and at a cost of about $1,100 an hour.  In tests, the K-MAX hovered at 12,000 feet with a 1,500-pound load slung beneath, completed two 175-mile round trips to deliver 3,000 pounds of cargo in less than six hours, changed missions mid-flight and delivered four 750-pound loads to four different destinations (three autonomously and the fourth one under operator control).

Northrop Grumman is working on adapting its 3,150-pound Fire Scout, originally designed as a vertical take-off and landing reconnaissance UAV for Navy ships, to carry up to 600 pounds of supplies in cargo containers mounted on its skids.

Like the K-MAX, the Fire Scout can fly autonomously or respond to instructions from an operator on the ground using GPS for navigation, but unlike the K-MAX, the pilotless Fire Scout doesn’t fly blind. Using advanced sensors, the Fire Scout can observe the landing zone it is approaching to ensure that it’s free of obstacles and people before touching down.  Sensors on the Fire Scout’s skids also detect contact with the ground and automatically detach the cargo containers, enabling the Fire Scout to take off again more quickly.

Finally, helicopter manufacturer Sikorsky announced last month that it is spending $1 billion to develop a unmanned version the Black Hawk, the military’s workhorse helicopter. Analysts expect the unmanned H-60 to be demonstrated this year and could be in service by 2015.

By now you’ve had your fill of top 10 lists for 2010. But this is one list you don’t want to miss. What will 2010 hold for Government Contracting? What shape will collaboration take between industry and government in addressing the tough issues of the day? ExecutiveBiz brought that question to top industry leaders. Here’s what they’re saying:

1.) Industry More Competitor with Government

Norm Augustine’s 2010 Prediction:

“The issues facing the nation and the world increasingly transcend the ability of either government or industry to solve alone. For example, the government clearly has overall responsibility for homeland security, yet 90 percent of the assets to be protected currently reside in the private sector.

“At the same time, as the federal debt grows along with the non-discretionary part of the federal budget, heightening fiscal pressures will be placed on the procurement process. As a consequence, industry is unfortunately likely to find itself more and more a competitor with government than a partner … with proven bad ideas rising from the ashes yet another time (e.g., fixed price research and development contracting).  The problem will be exacerbated by the inability/unwillingness of qualified individuals with industry experience to serve terms in government.

“As one who has spent a significant part of his professional life in each government and industry, I truly hope the above is wrong but that would not be how I would bet.”

(Norm Augustine is retired Chairman and CEO, Lockheed Martin Corp.)

2.) More Contracts related to the ‘Battlefield of the Future’

Paul Cofoni’s 2010 Prediction:

“CACI expects intelligence to be a mainstay of growth in 2010 and beyond. In addition, CACI is bidding for millions of dollars in cyber security contracts, as awareness of this kind of threat grows. C4ISR technology is also one of CACI’s strengths, and the company expects to see more contracts related to the ‘battlefield of the future,’ helping to guide and protect the warfighter and target the enemy on the battlefield.

“Going forward, our domestic operations are solidly positioned in the well-funded and high-priority areas of defense, intelligence, homeland security, and IT modernization. We remain agile in responding to market changes and aligned with the administration’s priorities in cyber security, smart power, and IT modernization.

“Many experts predict that non-defense government spending will grow faster than defense spending in coming years, and government contractors can meet those demands by offering new services in sectors like healthcare logistics, energy IT and IT modernization. Still, national security remains at the top of our government’s greatest challenges, and we will continue to concentrate our resources to help our clients preserve the freedom and liberty of our nation’s citizens while expanding to meet new areas of demand.

“National security remains at the top of our government’s greatest challenges, and we will continue to concentrate our resources to help our government and our clients preserve the freedom and liberty of our nation’s citizens. Even with multiple domestic issues facing our country, we cannot lose sight of ever-increasing threats from determined, persistent, and well-resourced terrorist organizations. There is no margin for error in our national security posture.

“Our recent record results for both the quarter and the year validate our strategy to focus our solutions in the well-funded and critical areas of defense, intelligence, homeland security, and IT modernization. strong performance in CACI’s U.S. operations.

“We anticipate continued demand for our proven solutions to keep our nation safe and implement efficient and cost-effective solutions to modernize federal agencies. We are positioned to expand our capabilities in defense healthcare logistics and IT modernization and address new opportunities in cyber security, smart power, and energy. We also expect to see continued growth in our highly profitable U.K. operations, including greater penetration into the public sector.”

(Paul Cofoni is President and CEO, CACI)

3.) Government-Industry Collaboration will be robust

Renny DiPentima’s 2010 Prediction:

“Government contracting will continue to be robust over the next decade, just as it has been over the previous five decades. A responsible and collaborative business relationship between government and industry benefits both. Government depends upon contractors in large part to get its jobs done and contractors depend upon government to keep their companies financially sound. This government-contractor relationship, more than ever, will depend upon mutual respect and trust and performance from both parties that delivers results.

“Effective, responsive collaboration [between government and industry] will require a clear understanding and expression of requirements on the part of government, effective and efficient solutions from industry that deliver results, and a working relationship based on trust and respect on the part of both. The collaboration must be characterized as a constant flow of communications between both government and industry at all phases of their work, from pre-solicitation exchange of ideas, to appropriate dialogue to truly understand the government’s requirements, to a clear articulation and demonstration of the solutions proposed by industry. Collaboration based on open communications, trust, and respect is essential to the success of solving any of the tough issues ahead.”

(Renny DiPentima is former president and CEO of SRA)

4.) Business Models Must Accommodate More For Less

Jacques Gansler’s 2010 Prediction:

“I think the key point of the next decade is going to be the budget crunch combined with, from the defense side, the huge spectrum of potential concerns on the security basis: pirates, terrorism, regional conflict, insurgence, possible future peer competitors, nuclear deterrence and that whole huge spectrum. In that environment we have to figure out ways to get more for less … and the models for getting more for less changes the business environment.”

(Jacques Gansler, former Under Secretary of Defense for Acquisition, Technology, and Logistics, is now a professor at the University of Maryland’s School of Public Affairs.)

5.) Government Will Expect More Secure Offerings from Industry

Melissa Hathaway’s 2010 Prediction:

“The need for partnership between industry and government will increase over the next decade especially as our enterprises become further interconnected due to our dependence on information technology. The seams between private networks and government networks will continue to blur and it will be harder to know where one ends and the other begins.

“We must work to understand the full extent of the vulnerabilities and interdependencies of our enterprises because our opponents are exploiting these seams and stealing our sensitive and proprietary information at an unprecedented volume. This requires industry and government to share details on vulnerabilities of and security threats to our infrastructures and information assets. Industry will need to provide a stronger service offering of security testing of networks to lower our collective exposure. Additionally, I expect that the government will demand from industry more secure software products and services. I am hopeful that the next decade will bring greater transparency and willingness to share information among and between enterprises so that, in partnership, we can raise our collective security posture.”

(Melissa Hathaway is President of Hathaway Global Strategies, LLC and Senior Advisor at Harvard Kennedy School’s Belfer Center)

6.) Another Year of Confidence Re-Building

Bill Hoover’s 2010 Prediction:

“2010 will be another year of caution and confidence rebuilding. Concerns about the deficit will influence both the government’s and citizens’ priorities and actions. National security and citizen safety remain the top priorities of government. Government services sector will continue to be the nation’s ‘anchor to windward.’”

(Bill Hoover is President and CEO of AMERICAN SYSTEMS)

7.) Year of Positive Trends and Challenges Ahead

Linda Mills’ 2010 Prediction:

“Government contracting is seeing some very positive trends and some challenges that the industry and government together will have to work to overcome in the next decade. Some of the positives we are seeing in legislative and policy trends include increased use of IDIQ contracts, Secretary Gates push towards 75 percent solutions, and spiral developments. At the same time, however, industry continues to face a move toward fixed price development contracts, long procurement cycles, continued protests, and insourcing.

“Northrop Grumman acted quickly and responsibly to comply with another positive trend, the tightening of the OCI policy. The key to go-forward success is consistent and clear communication with the contracting community and consistent application of these policies across government. Going into the new decade, we expect the government will uniformly enforce these new OCI regulations.

“Collaboration between government and industry will remain important in the next decade. Most tough issues require government legislative and policy changes before real progress can occur.”

(Linda Mills is Corporate Vice President and President, Northrop Grumman Information Systems)

8.) Cyber Czar, Bid Protests Key Issues to Watch

Stan Sloane’s 2010 Prediction:

“The new cyber czar will start to grapple with the challenges he’s taking on, and we’ll see some progress on the policy front, as well as collaboration with industry on intellectual property protection.

“There will be growing dissatisfaction with the bid protest mess, and we will start to see reform in the way of penalties for companies which abuse the process.
(May be a wish versus a prediction!)

(STAN SLOANE is President and CEO of SRA)

9.) Year of Modest Growth, Productivity Gains for GovCon Sector

Ralph Shrader’s 2010 Prediction:

“I’m cautiously optimistic that 2010 will be a year of modest growth and productivity gains for the economy as a whole, and for the government contracting sector. The most important challenges of the 21st century are the business of government — from national defense and economic security — to health, citizen services, and international development. While government officials clearly need to set policy, be in command, and carry out inherently governmental functions, the biggest challenges can’t be solved by government alone, so collaboration with industry is critical. Industry teammates bring innovation, specialized expertise, and value that helps win the peace and prosperity that citizens want and expect from government.

“Collaboration begins with respect. Government contractors must recognize that the mission of our nation and acceptance of taxpayer dollars is a sacred trust. The government, in turn, needs to respect the real value and patriotic commitment of the contractor community. Industry and government are on the same team, facing the same challenges, working toward the same goals. If all sides can embrace this point of view, the year and decade ahead will be among the most successful in history.”

(Ralph Shrader is Chairman, CEO, and President, Booz Allen Hamilton)

10.) Time for Fundamental Review is Now

David Walker’s 2010 Prediction:

“The federal government needs to engage in a fundamental review and re-engineering of what it does, how it does business and who does its business in the coming decade. This includes the need to address the 15 or so long standing and systemic acquisition and contracting challenges identified by the GAO. Successfully addressing these challenges will benefit both the country and taxpayers.”

(David Walker is president and CEO of the Peter G. Peterson Foundation)