Bloomberg News

Boeing Beats Lockheed to Keep $3.5 Billion Missile Shield Work

January 11, 2012

Dec. 30 (Bloomberg) -- Boeing Co. beat Lockheed Martin Corp. to keep a $3.48 billion, seven year contract for the primary U.S. shield against intercontinental ballistic missiles.

The Missile Defense Agency announced the contract in a statement today. The agency oversees the Ground-based Midcourse Missile Defense, which includes interceptors in Alaska and California, ground- and sea-based radar, satellites and a command and control system.

The loss is a setback for Bethesda, Maryland-based Lockheed, the world’s largest defense contractor. Boeing has held the contract since 1998 on a sole-source basis. The Chicago-based company has said the program has totaled as much as $18 billion during the 10 years ending 2011.

Cost would be a prime factor in deciding who wins the contract, Lieutenant General Patrick O’Reilly, head of the Missile Defense Agency, said in August 2010 when the agency was preparing to call for bids. “But before we get to cost, bidders have got to demonstrate they’ve the capacity and capability, and also an ability to do upgrades,” he said.

The contract for the first time will stipulate that the companies will be held financially responsible for poor-quality parts. The Ground-based Midcourse program had a 53 percent success rate in tests, with two, back-to-back test failures in 2010. In October, the Missile Defense Agency said a $300 million test failed because of a “guidance error” in the warhead made by Raytheon Co. of Waltham, Massachusetts.

Parts defects have affected nearly every major space and missile defense program, causing millions of dollars in cost overruns and many months of schedule delays, Christina Chaplain, an associate director at the U.S. Government Accountability Office who follows the agency said in an e-mail.

Lockheed’s team included Raytheon. Boeing’s partner was Falls Church, Virginia-based Northrop Grumman Corp. Raytheon, which makes the non-exploding warhead that is designed to seek and destroy enemy missiles, was on both teams.

--Editors: Stephanie Stoughton, Steven Komarow

To contact the reporter on this story: Gopal Ratnam in Washington at Tony Capaccio in Washington at

To contact the editor responsible for this story: Mark Silva at

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