The specter of federal budget reductions has meant hundreds of jobs lost at Northrop Grumman Corp. in Maryland, but as the defense contractor vies to build a key Navy radar system, that same cost-cutting pressure could boost the importance of Northrop's Baltimore-area operations, company leaders said.
The company, along with rivals Raytheon Corp. and Lockheed Martin Corp., is a finalist for what could be a $16 billion program to supply the next-generation radar system for Navy surface ships. Observers said the competition for the Air and Missile Defense Radar system could be fierce, with each company bringing different areas of expertise. Where the emphasis is expected to fall, given the budget climate in Washington, is price.
That is where Northrop officials say their Linthicum facility, housing 6,000 workers in the company's electronic systems division, comes into play. They are counting on the facility's efficiency and the flexibility of their technology design to make Northrop a contender for a job that could keep its local operations "cemented into the future."
Whoever lands the contract would be scoring a major victory, with the losers scrambling for a dwindling number of new opportunities, one observer said. And company officials acknowledged that.
"The fiscal environment we are in right now, we know more than ever affordability is the way of doing business, but it's also an opportunity," said Pat Antkowiak, general manager of the electronic systems sector's advanced concepts and technologies division. "It gives us a significant opportunity to drive change."
Northrop officials would not disclose the details of their bid, though Antkowiak said there has been a back-and-forth with the Navy recently clarifying details. The company has been among the finalists since June 2009, when the three defense giants were awarded contracts to study conceptual design of the radar system. In September 2010, new contracts were awarded to each to refine the concepts and the technology behind them.
The Navy plans to move into an engineering and manufacturing development phase with at least one of the bidders within the next two months.
The project, known as air and missile defense radar, seeks to combine various types of advanced radar. The Navy is seeking technology with more sensitivity and power to detect missiles and aircraft threatening its ships, even amid what the military calls "heavy land, sea and rain clutter."
"The kinds of radar we're talking about are capable of detecting much more sophisticated signatures of threats," said Ray Bjorklund, chief knowledge officer for Washington defense consulting firm Deltek. "It's not just a matter of saying, 'A plane is coming.'"
For example, the radar could identify details like what sort of weapons or radar-jamming technology that plane might be equipped with, he said.
At a media event Wednesday, Antkowiak said Northrop's strategy is playing up its experience in building radar, which ranges from systems fitting in the nose of F-35 fighter jets to ground-based systems four stories tall. The company is presenting its technology as made of modular building blocks easily integrated into existing technology the Navy uses, and scaled to any size.
The Linthicum facility, which backs up to Baltimore-Washington International Thurgood Marshall Airport, is also a key piece of Northrop's case, Antkowiak said. The entire life cycle of the radar technology's development can take place there, making for a more efficient — and thus cheaper — process.
The facility dates back to 1952, with the electronic systems sector forming in 1996 after Northrop acquired Westinghouse Electronic Systems Group. Products developed and manufactured there include radar systems for fighters, helicopters and surveillance aircraft, and ground-based radar for the U.S. Marine Corps. About 80 percent of the sector's business is with the Department of Defense.
"Our customers now need flexibility and affordability more than ever," said Antkowiak, recognizing the threat of federal budget cuts. The Defense Department is facing a 9 percent budget cut under a set of automatic reductions known as sequestration. "Hard decisions are going to be made, and not everything is going to survive."
A slowdown in the industry has already cost Northrop hundreds of jobs in Maryland. The company is in its third round of reductions over the past two years, with 350 jobs to be cut through buyouts offered late last year and possible layoffs early this year. The company eliminated 700 jobs in the sector in December 2011 and January 2012 through buyouts and layoffs, he said. The Baltimore area lost 290 positions — 200 by buyouts and 90 by layoffs.
The Navy contract could do much to secure long-term jobs in Linthicum, company officials and an analyst agreed. Antkowiak acknowledged it could mean "hundreds" of jobs.
Analysts declined to speculate on how the three players might fare in the competition. Details of the procurement process are not made public. Both Lockheed and Raytheon's websites dedicated to the air and missile defense radar system program emphasize flexible technology, much like Northrop's.
That sort of strategy has become vital in the defense industry, said William Loomis, a managing director with Stifel Nicolaus in Baltimore. Even superior technology that can't be delivered within budget is unlikely to move forward, he said.
That means limited opportunities for contractors.
"This system will be around for decades," Loomis said. "There's not going to be a lot of new starts. When you do have a new start opportunity like AMDR, you're going to fight hard for it."