There's nothing like competing for the headquarters of one of the nation's largest companies to make neighboring jurisdictions feel less neighborly.
When defense-contracting giant Northrop Grumman Corp. announced this week that it will move its Los Angeles headquarters to the Washington region, officials in Maryland, the District of Columbia and Virginia immediately pledged to woo the company with aggressive campaigns to showcase their strengths, such as a highly educated work force, good schools or low taxes. Those efforts could include tax breaks or other financial incentives.
"Game's on," said Jim Dinegar, president and chief executive of the Greater Washington Board of Trade, which positions itself as a neutral cheerleader in this three-way match.
It's the prestige of being home to a Fortune 100 headquarters that local leaders particularly want, along with having highly paid top executives as residents and the extra charitable giving, civic involvement and economic growth they can provide. Where one big firm moves, economic developers hope, others will follow.
Northrop Grumman already employs more than 40,000 in Virginia, Maryland and the District of Columbia, so the 300 extra jobs that would come with its main office are a small number by comparison.
For Maryland, success would be especially sweet. The state has had a long history of losing headquarters to mergers, the latest being Black & Decker of Towson. It also has a reputation for being less friendly to business than Virginia, whose officials noted Tuesday that the state has been ranked No. 1 four years in a row on the "Best States For Business" list at Forbes.com. (Maryland was 12th on the most recent ranking, pulled down in part by its higher taxes.)
"When we look at Northrop, to us, that's one of those opportunities that doesn't come around very often," said Christian S. Johansson, Maryland's secretary of business and economic development. "We're going to be aggressively pursuing this. ... We can really make a good business case for why Northrop should be choosing Maryland."
Maryland has a cluster of defense contractors, including Bethesda-based Lockheed Martin Corp., and some have been opening outposts here to prepare for the local business opportunities of the national military base realignment and closure process. BRAC is sending new government defense operations, and thousands of jobs, to Fort Meade in Anne Arundel County and Aberdeen Proving Ground in Harford County.
The National Security Agency, an important Northrop customer, is on the Fort Meade post. And the company has stationed nearly 12,000 of its Beltway-area workers in the state, including its large electronic systems division in Linthicum.
But Virginia has a bigger Northrop presence. The company employs 30,000 there, making it the state's largest private-sector employer. More of Northrop's clients, including the Pentagon, CIA and National Reconnaissance Office, are there. And in the past two years, defense contractors CSC and SAIC moved their bases to Northern Virginia.
Loren B. Thompson, a military analyst at the Lexington Institute who drives past many of these offices on his way to work in Arlington, thinks it's no contest.
"Virginia just seems to hold most of the cards," he said.
Washington, which has 1,000 Northrop jobs now, strikes him as out of the running. The potential threat of a terrorist attack is omnipresent in defense contractors' minds, so he doubts one would choose to locate its leaders there. Maryland and Virginia benefit from being near the nation's capital but at a potentially safer distance, though "there's a clear pattern among the recent arrival of defense companies in Washington: They tend to favor Northern Virginia," Thompson said.
Baltimore economist Anirban Basu agrees that it's tough to be pitted against Virginia, but he doesn't think Maryland is out of the running.
"A state that borders Virginia needs to pick its battles," said Basu, head of the consulting firm Sage Policy Group. "In my view, Maryland should pick this one. This one is pretty important and very visible."
The Greater Washington Board of Trade and its marketing affiliate, the Greater Washington Initiative, believe Northrop leaders haven't made up their minds yet and contend that each jurisdiction has a shot. Don't count out Washington proper, which is more aggressively marketing itself as a headquarters destination, they note. And they say Maryland has quality-of-life and transportation options going for it. Not that Virginia doesn't boast those advantages, too, they add.
"We have to be Switzerland," said Matt Erskine, executive director of the Greater Washington Initiative.
That leaves it up to the jurisdictions to sway Northrop. Johansson said Gov. Martin O'Malley would be calling the company's CEO, Wes Bush, who took over a few days ago, to make the state's case. Maryland's Department of Business and Economic Development is marshaling business leaders, local economic development directors and politicians as the next wave.
Sean Madigan, a spokesman for Washington's Office of the City Administrator, said top leaders in D.C. are talking to top leaders at Northrop "as we speak."
"We want to do anything we can to encourage them to locate in the city," he said.
Virginia said it is also in talks. Christie Miller, a spokeswoman for the Virginia Economic Development Partnership, noted: "We are always in contact with them. We have a very good relationship."
No one wanted to get into the specifics of tax breaks or other incentives. But that's part of what Northrop will weigh when it makes its decision this spring, company spokesman Dan McClain said.
With the rough economy and tight government budgets, economic developers from all over will be closely watching this deal "to see what it takes to land a big fish like this," said Dinegar of the board of trade. "The coffers for economic development aren't as full as they used to be."
McClain said the move isn't just about which jurisdiction will cough up the most money.
"We want to make sure we have a very convenient location that is also the best economic situation we can come up with," he said. "That includes more than just incentives - there are a lot of factors."
For Northrop, which has been based in the Los Angeles area since its founding in 1939, the move is about increasing access to the federal agencies whose spending decisions can make or break contractors.
"We're trying to both protect the jobs we have and build more jobs for the company, and we think the best way to do that is be very engaged with our customers," McClain said. "It's something our company leadership has discussed over probably several years, but it's a disruptive thing to do to the people involved. So we thought with the change to the leadership we have had, that this is a good time to bite the bullet and make the move."
Contenders for Northrop's headquarters
.............................................................. .....Maryland Virginia D.C.
Percentage of adults with bachelor's degrees 35% 33% 47%
Median household income $70,000 $61,000 $56,000
State corporate income tax rate 8.25% 6% 9.975%
Number of Northrop Grumman jobs 11,500 30,000 1,000 Sources: American Community Survey estimates, Tax Foundation, Northrop Grumman
Northrop HQ would boost egos more than economy. PG 3A