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New AEGIS Weapon System Contract Attracting Interest

by: Matthew Potter
November 26, 2011

Category: Boeing, Business Line, Companies, Contract Additions, Contract Awards, Countries, development program, Events, Federal Budget Process, Japan, Lockheed Martin, logistics, Military Aviation, missile defense, production program, Proposal, Raytheon, Restructuring, Spain | RSS 2.0

It is possible if a Service does not change a basic system or design for several decades for one company to dominate that program receiving the majority of the revenue and earnings from it. The U.S. Navy introduced anti-air warfare cruisers in the late 1970’s equipped with the new AEGIS weapon system as a major upgrade to its ship based air defense network. The AEGIS weapon system comprises the radars, software, command and control system as well as the missile and its launcher. The original version of the AEGIS was developed and produced by General Electric (GE).

In the early 1990’s Martin Marietta purchased that part of GE when the system had been in production and use for almost twenty years. By that time the Navy had completed production of the CG-47 class cruisers and was installing the system onto the DDG-51 destroyers. Martin Marietta was soon merged with Lockheed to form Lockheed Martin (LMT) who have been the prime contractor ever since. The U.S. Navy has purchased over 40 CG-47 and 50 DDG-51 although not all remain in use. The DDG-51 remains in production.

The AEGIS systems has also been sold to Japan and Spain.

The AEGIS weapon system has undergone incremental upgrades over the years most importantly to integrate Ballistic Missile Defense (BMD) capability and using the STANDARD Missile-3 designed to conduct exp-atmospheric intercepts of missiles. All of this has added up to years of funding worth tens of billions of dollars for Lockheed.

Now the Navy is considering opening up the core contract to competition so that Lockheed may lose its hold on the business. This of course is attracting a great deal of interest from other large defense contractors as the initial contract will be worth a decent amount but down the road the contract could be worth billions.

Boeing (BA) and Raytheon (RTN) reportedly are considering submitting bids for the contract. Both have expertise in radar and missiles from a variety of other programs although Raytheon makes the STANDARD Missile used by U.S. Navy and other countries for the air and ballistic missile defense program which is part of the AEGIS system. Boeing has experience designing, integrating and operating the Ground Based Missile Defense (GMD) system based in Alaska.

The Navy of course is hoping for a better price for its support believing that competition will aid them in getting this. In the time of projected massive defense cuts competition will help the military save money in the future.

This will be major win for the company that either keeps the contract or acquires the work from Lockheed. Competition if the other companies believe they can do the work and win it should be quite fierce.

Photo from Surface Forces Flickr photostream.

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