Northrop Grumman decides to move headquarters to Northern Virginia

By Dana Hedgpeth and Rosalind S. Helderman
Washington Post Staff Writers
Tuesday, April 27, 2010; A14

Northrop Grumman has chosen Northern Virginia as the new home for its global headquarters, ending a heated competition among Virginia, Maryland and the District for the prestige of playing host to the defense contracting giant.

Virginia Gov. Robert F. McDonnell (R) announced the decision Monday night in a joint statement with Northrop, describing the selection as a victory for what he called his administration's commitment to promoting business development.

"To gain the corporate headquarters of one of the largest global security contractors in the world is a testament to the strong business climate that we are focused on continually improving," said McDonnell, who has scheduled a news conference for Tuesday afternoon at Northrop's Rosslyn offices to discuss the move.

The statement did not specify a final site for the new headquarters. The company has been considering locations in Fairfax and Arlington.

Northrop is a major government contractor, with $25 billion in contracts, and is one of the region's largest employers, with roughly 40,000 workers in the Washington area and 120,000 worldwide. In January, Northrop's newly picked chief executive Wes Bush outlined plans to move the company's headquarters from Los Angeles to be closer to the U.S. government, a shift that will involve about 300 headquarters staff.

Virginia, Maryland and the District all sought to lure the company to within their borders. The District had proposed a package worth $25 million in tax breaks and grants. Maryland, too, offered incentives, and one state senator in Maryland contended in a letter to Northrop's chief executive that he should choose Maryland over Virginia because the state is more friendly to gay residents. Northrop Grumman has won awards from gay rights groups for workplace policies.

Bush gave credit to competitive offers from Maryland and the District but said in Monday's statement that the company's "final decision was driven largely by facility considerations, proximity to our customers, and overall economics."

Though the exact package of inducements is not yet clear, McDonnell had sought a number of changes from the General Assembly to help lure the company and provide a fertile ground for other businesses. He secured approval to use money from a state economic development fund to pay for renovations to private buildings.

The fund had previously been limited to developing public infrastructure. The legislature also agreed to raise a cap on grants available to companies that create high-paying jobs. The state had been nearing a six-year, $30 million limit on the program. Because of the legislative change, the state can now spend another $30 million over the next six years, starting July 1.

And just last week, legislators agreed to reinstate a tax deduction for Virginia manufacturers that legislators had previously agreed to begin phasing out. Aides to the governor told legislators privately that Northrop Grumman qualified for the domestic production tax break.

The political stakes of Northrop's decision have been building for McDonnell, who has endured several rocky weeks that included a turn on national cable news after he issued a proclamation in honor of Confederate History Month that at first omitted reference to slavery. The Republican had run for office in the fall pledging he could bring new business to Virginia with a commitment to limit regulation and keep taxes low.

That political philosophy, McDonnell indicated in the joint statement, had helped land the company. "This Administration will keep taxes and regulations and litigation at a minimum to attract job-creators from around the world to our state to ensure more new opportunities for all Virginians," he said.

Northrop Grumman's unusually public offer to move to the region sparked criticism from some local officials who said the company was asking for too much.

Fairfax County officials, who spoke on the condition of anonymity because the closed-door negotiations were private, said Northrop sought, among other things, money to help cover the moving costs of its employees and pay for country club memberships. It also sought the use of discounted county hangar space at Dulles International Airport for its corporate jet, sources said. It's not clear if any money for those purposes is forthcoming.

Fairfax County Board of Supervisors Chairman Sharon Bulova (D) said that the county does not routinely offer cash incentives or tax breaks for a corporate relocation. It is more common to see the county offer money in the form of infrastructure improvements, such as improved access roads.

"We like to pursue projects that offer tangible benefits to the public," Bulova said.

A state official familiar with the deal said that Virginia's economic development officials were frustrated that Fairfax officials did not offer cash incentives. State officials said that if the company had chosen another location, Fairfax officials would have had only themselves to blame.

Some real estate brokers close to the deal and a Fairfax government source said they expect Northrop to pick a spot at the Fairview Park office complex in Fairfax because it is close to facilities the company already has in Tysons Corner, Rosslyn and other locations.

Northrop had considered other sites. In the District, it looked at lots at Fourth and E streets SW and Sixth and E streets SW, near Nationals Park. It also considered a planned office building on North Glebe Road in Arlington's Ballston corridor and a location on Gaither Road in Rockville.

In a statement late Monday, Maryland Gov. Martin O'Malley (D) congratulated Virginia for landing Northrop, calling it a "win for the entire greater Washington region." He added: "With today's announcement the region will not only gain new corporate-level jobs, but a number of the company's key subcontractors and suppliers."

Bush telephoned O'Malley on Monday evening and "expressed his disappointment" that news of the company's decision "leaked out the way it did," said O'Malley's communications director, Rick Abbruzzese.

According to Abbruzzese, Bush told O'Malley that they "had been impressed with Maryland's package of incentives but were making what amounted to a real estate decision."

Staff writers Derek Kravitz, Jonathan O'Connell, Aaron Davis, Anita Kumar and John Wagner contributed to this report.

© 2010 The Washington Post Company