Boeing is Awarded $3.5B Contract

The Missile Defense Agency announced the contract in a statement. 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 Boeing team, which included Northrop Grumman Corp. of Falls Church, Virginia, delivered “a cost-effective approach to program management and execution,” Dennis Muilenburg, chief executive of Boeing’s defense unit, said in a statement.

Bethesda, Maryland-based Lockheed, the world’s largest defense contractor, was seeking to dislodge Boeing from the contract it has held since 1998 on a sole-source basis. Chicago- based Boeing has said the program has totaled as much as $18 billion during the 10 years ending 2011.

Lieutenant General Patrick O’Reilly, head of the Missile Defense Agency, said in August 2010, when the agency was preparing to call for bids, that it needed to contain costs. “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 government for the first time is stipulating that the contractors will be held financially responsible for poor- quality parts. The Ground-based Midcourse program had a 53% 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.