The head of Northrop Grumman, the defense giant moving to Virginia from California, is optimistic the company is working out the kinks in its troubled multibillion-dollar contract with Virginia for information-technology services.
Northrop Grumman CEO Wes Bush, in announcing today better-than-expected profits, told stock analysts that recent changes in the firm's contract with the Virginia Information Technologies Agency mean there is "better alignment between the customer and ourselves."
Bush appeared to signal that the revisions could turn the contract into a money-maker. In February, Bush was quoted as saying that the Virginia deal hasn't been profitable; that Northrop Grumman was trying to break even.
"We've spent a lot of time together . . . working to get the parties together, focusing on how we move the program forward," said Bush, who joined Gov. Bob McDonnell in Arlington County yesterday to announce that Northrop Grumman is moving its corporate headquarters from Los Angeles to Northern Virginia.
Before taking questions, Bush offered an overview of Northrop Grumman's first-quarter performance that included a reference to the modified contract with VITA, which has been a source of turmoil for the company and the state.
Bush described the contract changes as "an important step forward;" that they would resolves issues surrounding the "program's scope and performance expectations."
The Virginia contract -- it's state government's richest-ever privatization pact -- is being extended three years to 2019.
Northrop Grumman, originally hired for 10 years but now assured work for 13, also is guaranteed additional payments of $105 million.
However, the revisions could be worth $236 million to Northrop Grumman, given that the state will pay the company an additional $47 million for computer security and safeguards, while surrendering discounts worth about $84 million.
Northrop Grumman, which today disclosed profits per share of $1.51, beating analysts' estimate for Bloomberg Businessweek of $1.32, will receive from Virginia $12 million to $14 million in incentives for relocating its headquarters and 300 jobs.
McDonnell, a Republican, today was asked to reconcile his criticism of rising federal spending with Northrop Grumman's reliance on the Pentagon, which is the company's biggest customer and located in Virginia. McDonnell, who took $75,000 in political contributions from Northrop Grumman, said his concerns are with what he called "pork."
In contrast, the defense budget -- a major source of jobs in Virginia -- is "good federal spending," said McDonnell.
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