On Tuesday, July 31, 2007, Northrop Grumman President and Chief Operating Officer Wes Bush spoke at the West Virginia High Tech Consortium Foundation in Fairmont, West Virginia. Below are his delivered remarks.

Strengthening America's High-Tech Talent Base

Thank you, Ray (Oliverio). And my thanks to the West Virginia High-Tech Consortium Foundation. I really appreciate you hosting me today. It’s great to have this opportunity to share some thoughts with West Virginia’s high-technology professionals and community leaders.

Also, it’s great to be back in West Virginia. As Ray mentioned, I grew up in West Virginia and went to high school here, so my fondness for this state is based on a deep appreciation of its many virtues. I’m also delighted that my wonderful wife Natalie, who grew up in Morgantown and is a graduate of WVU, is able to be here with me today. Natalie comes from a family with a lot of WVU connections – her father taught at the University, her mother worked there, and both of her brothers are also WVU grads.

While Northrop Grumman is a name that is well known in high technology circles such as the aerospace, defense, and information technology industries, it is not a highly publicized company, so I thought I would give you a brief idea of who we are and what we do.

Northrop Grumman has about $30 billion in annual sales, and we have 120,000 employees scattered over all 50 states and 25 countries around the globe. We build all sorts of fascinating things – I’ll give you just a few examples to give you a sense of the company:

  • We build satellites that are designed to monitor the earth to protect our country and to assess our environment.
  • As well as telescopes that fly in outer space and that can detect light from a distance so great that they are actually looking back in time at very early formative stages of the universe.
  • We also build airplanes such as the B-2 stealth bomber. And we build the Global Hawk unmanned aerial vehicle, which can fly by itself, without a pilot, for more than a day at altitudes of 60,000 feet.
  • We are the only builder in the United States of nuclear aircraft carriers.
  • We also build nuclear submarines, as well as Destroyers and large amphibious expeditionary ships for our Marines.
  • We have a very strong capability in electronics and complex sensors ranging from radar systems for airplanes and ships to systems that process mail and check it for bio hazards.
  • We are the systems engineers for the nation’s land-based fleet of intercontinental ballistic missiles, and we are building the next generation of interceptors for national missile defense.
  • We are implementing a broad-band wireless network in the city of New York to enable all the emergency services providers to instantly share information, including video, to enhance large scale emergency response.
  • We manage the entire IT infrastructure for the state of Virginia.
  • We develop, deploy and maintain the Military’s records system that contains over 9 million electronic health records of DoD personnel.
  • And some of the most innovative work we perform is in the field of biometrics and identity management. That work is based in our Civilian Agencies business group, and the president of that business unit, Linda Mills, is here with us today.

You can see that our work is at the very pinnacle of technological capability – and the things we do are of critical importance, as they impact the very security of our nation. We take a lot of pride in doing these things well, and being entrusted by our nation with such critical work. We know we have to continuously earn that trust over and over again on every one of our more than 20,000 programs we are performing for our customers.

I mentioned earlier that we have over 120,000 employees – about 40,000 of them work in the technical disciplines such as engineering, math, and science. Our company, and our ability to perform our critical job for our country – is critically dependent on our ability to find qualified technical talent to keep the U.S. ahead of the rest of the world.

A key reason for our interest in forging a deeper connection with the state of West Virginia – and the topic I would like to discuss with you today – is that very issue – the challenges the nation is facing with respect to engineering and scientific talent.

In the view of many economists, America's major competitive advantage in the globalized marketplace of the 21st century must continue to be its capability for high-tech innovation.

As a recent National Academy of Sciences study put it, the most effective way for the United States to maintain leadership as global competition increases will be to draw on its traditional strength in human capital. We must rely on our educated, innovative workforce as our most precious resource for dealing with the changing environment.

However, serious questions are now being raised about whether this resource can continue to keep us in this same leadership role in the future. The uncertainty arises from two daunting challenges that we face. First, our high-tech work force is facing a demographic downturn.

And second, our education system is not producing an adequate number of graduates to re-supply this work force. As a nation, we are not placing a premium on a science and technology education and we are replenishing our current workforce at a lower rate than other nations, such as China, Japan and India.

The U.S. science and engineering workforce is aging and retiring while the supply of new scientists and engineers who are U.S. citizens capable of supporting our national security work is decreasing.

This hits very close to home for our company. At Northrop Grumman, if we look at the 40,000 people we employ in the technical fields, there are many critical disciplines where 50 percent of our employees will have the opportunity to retire within five years. That’s a statistic to keep you awake at night.

Turning to the education system, we see other alarming statistics. Some of these may be familiar to you:

  • In an assessment of 15-year-old students from 49 nations, those from the U.S. scored in the middle or in the bottom half of the group in science literacy and math;
  • Only 15 percent of U.S. high school graduates have taken the necessary course work to be eligible to enter engineering; and
  • Only 6 percent of our undergraduates study engineering -- the second lowest percentage among developed nations.

What are businesses doing to address these serious shortcomings?

Across the country, Northrop Grumman is working with universities and schools to help the education pipeline serve businesses better. We are providing university engineering and business schools with counsel about curricula and opportunities for cooperative working assignments.

We also have programs to improve K-12 education in math and science, and to help teachers introduce students to the excitement of science and engineering. We know that students are shaped in their views of careers early on – usually as early as middle school.

Here in West Virginia, for example, we contribute to activities like Camp STEM – a great educational experience aimed at stimulating interest among high school students about high-technology careers.

These are some of the things we are doing to strengthen education. But we are also taking other steps to address the issue of our shrinking talent base. A key part of our effort is to reach out beyond our company to other enterprises and locations where substantial talent and capability exists and is being created.

This is the basis of Northrop Grumman’s strong commitment to hiring skilled people and partnering with outstanding companies and universities in states like West Virginia that have leading high-tech sectors.

One skill set we’re interested in is biometrics, and West Virginia plays a key role in this area. It’s clear that the north central region of the state is the Silicon Valley of America’s biometrics activity. Having spent a lot of time in Silicon Valley, I can assure you this is a poor analogy, because Silicon Valley cannot hold a candle to the beauty of this state!

Here in this area, we see a proliferation of companies in this specialty, as well as institutions like West Virginia University’s Center for Identification Technology, DoD’s Biometrics Fusion Center in Bridgeport, and the FBI’s world-leading ID repository in Clarksburg.

We’re drawing on such local expertise to support two new contracts based in West Virginia. We recently won an Army award to provide a biometrics system that will link the intelligence community with civilian agencies, in a focused effort to address the war on terror.

In addition, under a DoD contract, we’re developing IT components for biometrics systems that protect the military and civilian employees at installations in combat areas worldwide. We have employees in Fairmont supporting the two contracts, and are hiring more employees as these efforts grow.

Another main biometrics emphasis is our pursuit of the FBI’s Next Generation Identification (NGI) competition. This ten-year development, operations and maintenance program will provide additional biometric services to support the expanded FBI mission. It has a component that will be located in West Virginia to support the FBI facility in Clarksburg.

Our biometrics projects are drawing on this state’s strong IT and systems engineering capabilities, but these skills are needed for other IT projects as well. In a large NASA program we have West Virginia-based personnel verifying and validating mission critical software. We will need similar expertise for a follow-on contract recently awarded involving work on the Orion and Ares vehicles of NASA’s manned space program.

Northrop Grumman also provides IT support for the U.S. Postal Service out of Charleston and for the Internal Revenue Service out of Martinsburg. In Kearneysville, we have employees providing systems engineering and technical support for the U.S. Coast Guard.

Overall, we have about 75 employees working in the four West Virginia locations I just mentioned – and this total will increase to more than 100 under existing contracts. If we are successful in capturing the FBI’s NGI contract I mentioned earlier, our West Virginia team will grow to several hundred employees over the next few years.

In an effort to accelerate progress in these various high-technology projects we’re also building relationships with West Virginia University, Fairmont State, Wheeling Jesuit University and other universities in the state.

These multiple activities demonstrate our serious commitment to economic development in West Virginia – commitment to the long-term success of local people and organizations.

A key part of this, of course, is our collaboration with local companies who serve as subcontractors on our programs.

We’re proud of our successful partnerships with innovative small businesses around the country. Last year nearly 40 percent of our company’s subcontracting dollars went to small businesses. We consistently exceed our government-assigned targets for small business subcontracting.

In 2006, our purchases from West Virginia supplier firms totaled almost 27 million dollars. A lot of that went to high tech companies. Our biggest supplier in dollar terms was Aurora Flight Sciences, in Bridgeport, which is manufacturing composite components for our Global Hawk high-altitude unmanned surveillance vehicle.

We have two partners who are working with us in West Virginia on the DoD biometrics contract – NEW BOLD Enterprises and Ideal Innovations.

The NASA work mentioned earlier will be performed in Fairmont with West Virginia small business partners including AFM, Key Logic Systems, MPL, MSIS and the West Virginia High-Tech Consortium Foundation. West Virginia companies on our team for the FBI’s NGI program include Azimuth, DSD Labs, Galaxy Global and, again, Key Logic Systems and the High-Tech Consortium Foundation.

In addition, in a partnership with the West Virginia High-Tech Consortium Foundation, Northrop Grumman is pursuing a grant to develop a Technology Center of Excellence for the National Institute of Justice. The center will facilitate the transfer of new technology from the laboratory into practice by first adopters.

In forming partnerships with small companies, we consider a wide range of qualifications relating to engineering and technical capabilities, experience, performance records, capacity, location, infrastructure strengths, and so forth.

I’m frequently asked what impresses us the most when we are assessing a prospective subcontractor – I would have to say it is alignment with our values as a company, which really comes down to the trust that is earned by meeting commitments – meaning the delivery of quality products, on-time, and within the established cost objectives.

One way we form relations with subcontractors is through the government programs that fund Small Business Innovation Research and Small Business Technology Transfer. We have had quite a bit of success with these programs.

We also serve as mentor to small companies under mentor-protégé programs set up by DoD, NASA, the Department of Homeland Security and the Federal Aviation Administration. These programs fall under government regulations covering minority or disadvantaged small businesses.

Since 1992, we have mentored over 90 small businesses. We currently have a total of 22 active agreements with small company protégés all around the nation.

A great example of a successful mentor-protégé arrangement in West Virginia is our relationship with the Morgantown IT company, Key Logic Systems. We’ve been supporting Key Logic with transfer of IT services technology – and, as I mentioned earlier, they are now a member of our team pursuing the important NGI program. If we win NGI, Key Logic will be performing program management work.

I’ve been talking about our company’s need for high-technology talent to deal with the competitive conditions of a globalized economy. But our current search for engineers and other technology workers has another key feature I haven’t yet discussed.

It’s not just a matter of finding people who meet our performance standards in the right technical areas, but also a matter of being able to hire them and operate in areas with a cost structure that keeps us competitive with other global companies.

While this requirement applies both to hiring and subcontracting, let me simplify by focusing just on the former – and also by concentrating just on our IT business.

As you know, many companies in the United States are now responding to globalization by “off-shoring” – that is, by making use of engineering services in other countries that can deliver what is needed for about one-fifth the price charged by U.S. counterparts.

Given this differential, the practice of off-shoring is expanding rapidly.

As an American company performing national security work, Northrop Grumman is very uncomfortable with the idea of off-shoring American jobs.

At the same time, as a company with more than $10 billion in annual IT revenues, we’ve had to give priority attention to developing an alternative to the off-shoring business model.

Our solution is a new work force model that we believe is the first of its kind in industry. As we explained in this morning’s press conference, Northrop Grumman is establishing what we call National Work Force Centers in multiple areas across the United States.

We’re selecting lower-population areas that are often away from the major metropolitan locations where our work has traditionally been performed. These areas often offer a high-tech talent pool and comparatively low operating costs, combined with an attractive place for employees to live and raise their families. Staffed with this talent and operating in accordance with Northrop Grumman standard processes, the new work force centers will deliver the high-quality products and services expected by our customers.

To ensure a continuing supply of talent, Northrop Grumman is partnering with colleges and universities in these locations to help develop curricula and skill requirements in the IT field.

By locating in these less populated regions, Northrop Grumman will be able to take advantage of lower operating costs and compete against companies that rely on overseas technology workers, while bringing substantive work and technology jobs to these areas.

With this approach, we will soon have multiple new National Work Force Centers across the U.S. that we can draw on to support our customers on existing and new programs – helping us focus our efforts and improve efficiency.

Furthermore, the benefits to employees and local economies will be substantial.

Employees in the National Work Force Centers will enjoy the opportunities and satisfaction that come with working for a Fortune 100 company. They’ll be able to build careers with very attractive compensation while staying in the areas they want to live in. Other benefits include the lower cost of living compared to metropolitan markets, reduced traffic and shorter commutes, improving the quality of life.

The National Work Force Centers program will also have a positive economic impact by keeping people from leaving low-population areas for career opportunities elsewhere. In addition, the excellent salaries at the Northrop Grumman sites will inject dollars into local economies.

We are already operating sites in Montana, Texas, Virginia, Pennsylvania and South Dakota. We are evaluating a number of others, expecting to select up to 10 by year end and potentially 10 or more in 2008.

In West Virginia, we have recently initiated assessments in the I-79 High-Tech Corridor. We announced today our plan to identify the best site and open a National Workforce Center here in West Virginia.

We have an extensive process for choosing locations for the centers. We consider such factors as current population, infrastructure and operating costs, and educational institutions in the area that will help us build the pipeline for a future work force.

One very important factor is the community incentives available. In connection with our effort to establish the work force centers, as well as our more general economic development initiatives, we are seeking support from your government leaders both locally and in Charleston.

We hope to be persuasive in making our case about the benefits we can bring to West Virginia. As you can see from the fast-growing list of states mentioned earlier, we’ve received some very competitive proposals that have rapidly led to productive arrangements in multiple locations. According to the National Academy of Sciences, in coming years the importance of leadership in science and technology will increase – until the ability to innovate becomes the crucial factor in the success or failure of any organization or nation.

Our company shares this perspective – which is why we are visiting high-technology hubs throughout the country to explore economic development possibilities with community and government leaders.

In West Virginia, as elsewhere, we’re seeking partnerships that generate mutual benefits: we need superior talent, quality companies with whom to partner, and globally competitive work centers – and we’re offering an opportunity for high-tech jobs, business growth and stronger local economies.

By working together we can help America retain the science and technology leadership that we depend upon for national security, healthy citizens, and a rising standard of living. By working together, we can help maintain our leadership in technological innovation, which keeps our economy growing and our nation strong. And this great state can play an important role in making this happen.

Thank you again for joining me here today – it is a real pleasure to have the opportunity to spend time with all of you. If you have questions, I’ll be happy to try to answer them.