CIO — At Northrop Grumman, a project to figure out how the heck it was spending multiple millions of dollars on contract IT labor has now spread to other parts of the company and, in turn, produced multiple millions of dollars in savings.

The idea of keeping closer tabs on contractors started in 2003, when Northrop Grumman realized it was spending an unspecified amount of money, estimated to be in the millions per year, on outside IT workers from dozens of vendors. As important as the dollars spent was the fact that 85 percent of those outsiders were working on key projects for Northrop Grumman's own customers—hundreds of IT professionals represented the company but weren't directly employed by it.

"The sensitivity around the role they played and sheer magnitude of the spend caught the attention of the CFO," says Bob Lewis, director of business operations for Northrop Grumman's Information Systems sector, one of eight "sectors" in the $34 billion company. With that "excellent sponsor," in pocket, Lewis and staff hired procurement management vendor IQNavigator to help determine where its money was going.

Historically, Northrop Grumman had its contractors use paper timecards to track their hours. That data was manually entered into Northrop Grumman's financial systems. The payment process was slow, Lewis says, and difficult to forecast. Various Northrop Grumman sectors would be negotiating for labor with the same providers at the same time and not know it.

Starting in Northrop's IT sector, IQNavigator worked with Lewis' staff to collect data on contractors, contracts, pricing and projects in play, to get an overall view of costs. Then they were able to see, in one spot, which contractors were billing for how much. As other sectors signed up for the IQNavigator service, Northrop Grumman executives across the company came to understand exactly what they were spending—$200 million—and on how many contractors—1,900.

A dashboard also shows them such data points as how much each sector spends on outside personnel, how long those contractors work for Northrop Grumman and average billing rates. That information helps managers determine the best price they can get from various contractor vendors, for example, or decide whether it makes financial sense to offer a given contractor a full-time job.

IQNavigator account managers work on site with Northrop Grumman's own human resources managers. And with the recession forcing budget cuts, IQNavigator's role was expanded to include background checks and drug screening of job candidates. "That's work we used to do and couldn't afford to anymore," Lewis says.

Continue Reading