Week of December 15, 2003
Snapshot from the Field
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$4.5B Missile Contract
Will Create 3,900 Jobs
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
WASHINGTON, D.C. Considered a long shot in some quarters, the bid mounted by first-timer Northrop Grumman (www.northgrum.com) and Raytheon (www.raytheon.com) for a billion-dollar U.S. missile deal has scored a direct hit:
The Dept. of Defense's (DOD) 11-month old Missile Defense Agency (MDA) has awarded the two teamed companies the eight-year US$4.5-billion contract to design and build the test-phase version of the Kinetic Energy Interceptor (KEI). The KEI is part of the larger National Missile Defense (NMD) plan pushed by President George W. Bush (R) to protect the U.S. from land- and sea-launched ballistic missiles.
The Northrop/Raytheon proposal beat out a Boeing-led bid for the KEI, designed to knock out ballistic missiles in the critical moments shortly after takeoff.
The contract's fallout will include substantial new-job creation at a number of Northrop's and Raytheon's existing U.S. facilities. The two companies to date have estimated that at least 3,900 positions will be assigned to work on the KEI program during the contract's duration.
Six Sites Tapped to DoNorthrop and Raytheon officials haven't yet released full job-creation or capital-investment estimates for specific facilities. But they have earmarked the operations that will do most of the work on the KEI program, which will be based in Arlington, Va., near DOD headquarters.
Most KEI Contract Work
For Northrop, the winning bid's lead company, the KEI work will create 3,000 jobs (including contracting positions), said Ronald D. Sugar, Northrop's chairman, CEO and president. Northrop facilities that will perform the in-house contract work will include operations in Clearwater, Fla.: Chandler, Ariz.; Goleta, Calif.; Huntsville, Ala.; and "Northern Virginia," he added.
Sugar didn't estimate how many jobs would be created at each of those locations. A Northrop spokeswoman, however, offered one specific estimate, projecting that the program will add some 500 jobs in Huntsville. Northrop currently has 1,300 employees in that Alabama city.
For Raytheon, the KEI contract's principal subcontractor, the award will create at least some 900 jobs, said Louise L. Francesconi, a Raytheon vice president and president of the company's Tucson, Ariz.-based Missile Systems business. Most of the company's in-house work, she added, will be done in existing facilities in Tucson, Ariz.; and Massachusetts,
Raytheon is headquartered in Waltham, Mass. The Tucson operation, however, will get the lion's share of Raytheon's KEI jobs, said company spokesperson Sara Hammond. Raytheon already has 10,000 workers in Southern Arizona.
A host of other companies will also share in the huge KEI staff-up. As is typical for DOD contract work, the two lead companies already have a broad-ranging subcontracting network in place.
Key KEI contract subcontractors, said Northrop and Raytheon officials, include Aerojet, Alliant Techsystems, Ball Aerospace, Booz Allen Hamilton, Davidson Technologies Inc., Information Extraction & Transport Inc., Orbital Sciences Corp., Oshkosh Truck Corp., Photon Research Associates Inc., Rockwell Collins, SAIC, Schafer Corp., SEI, and 3D Research Corporation. Northrop and Raytheon haven't yet estimated how many of the KEI-created jobs will go to subcontractors.
Win Northrop's First for Ballistic MissilesThe award is obviously an important win for all of the involved companies. For Los Angeles-headquartered Northrop in particular, though, the impact over the long term could extend beyond the KEI work.
The contract is the first that Northrop has ever landed - or even sought - as prime contractor for a major DOD ballistic-missile defense program. The KEI award marks a significant payoff for the company's $12.5-billion acquisition of satellite-sensor maker TRW in 2002, part of Northrop's effort to expand into space and missile-defense work.
"We are proud of this contract win, which firmly establishes Northrop Grumman's position as a top-tier systems integrator for missile defense," said Sugar.
Northrop and Grumman won the KEI award over a teamed effort by Boeing and Lockheed Martin. Boeing is the incumbent prime contractor for the Pentagon's ground-based missile-defense system.
The Boeing Scandals: WillBoeing's recent DOD-related scandals had no bearing on the KEI contract's final selection, said MDA Deputy Director Maj. Gen. Trey Obering.
They Alter Future DOD Awards?
Nonetheless, Boeing of late has been flailing about in very deep hot water. In a recent $17-billion proposed deal, Boeing was charged with recommending leasing 100 767s to the U.S. Air Force for use as in-flight refueling tankers - even though investigations revealed that leasing was more expensive than buying the aircraft.
And the Chicago-based company was earlier caught with thousands of pages of Lockheed Martin's proprietary information, which provided details of the rival firm's 1998 bid for a $2-billion rocket-launch contract. The latter scandal resulted in Boeing's being barred from future rocket-launch contracts, as well as losing seven launch contracts it had already been awarded.
The scandals have triggered the abrupt exits of three top Boeing executives, including Chairman Phil Condit. More casualties could be coming. Some critics in Congress are calling for further investigation of Boeing's government dealings.
It remains to be seen how the scandals will affect further DOD work. Boeing has concentrated on military contracts since the post-9/11 slump in commercial air travel. Military work, in fact, now accounts for more than half of Boeing's revenues.
Meanwhile, Boeing has brought former McDonnell Douglas CEO Harry Stonecipher out of retirement to replace Condit. Stonecipher described criticism over the company's 767 Air Force proposal as "a hiccup [that] will cause us to have to do a lot of reassuring with the government."
KEI Is First U.S. Missile-InterceptorThe KEI award is the first missile-interceptor contract since the Bush administration announced in late 2001 that the U.S. was abandoning the 1972 Anti-Ballistic Missile treaty with Russia. "I have concluded the ABM treaty hinders our government's ability to develop ways to protect our people from future terrorist or rogue state missile attacks," Bush said in announcing the pullout.
Award Since ABM Treaty Pullout
Shortly thereafter, the U.S. created the MDA (formerly the Ballistic Missile Defense Organization). Bush and Congress chartered the agency and charged it with acquiring effective ballistic missile defense systems for the U.S. armed forces.
The Interceptor will add another layer of defense to the existing U.S. ground-based system that Boeing developed, MDA officials explained.
The KEI is designed to destroy hostile missiles at their most vulnerable stages: in the three-to-five-minute window during booster lift-off and initial ascent. At that point, targets are at altitudes of less than 120 miles (192 kilometers) and moving at slower speeds, still powered by rocket motors and with fuel tanks attached. In addition, target missiles at that stage haven't yet had a chance to take countermeasures or to release decoy missiles. A target hit at that altitude is also more likely to crash and explode in the nation from which it was launched, officials explained.
Northrop Will Be Systems IntegratorLead company Northrop will serve as systems integrator for the KEI, which is 36 feet (10.9 meters) long and 36 inches (91.4 centimeters) in diameter. The company's overall responsibilities include systems engineering, systems integration and testing, command and control, battle management, communications, and launcher development.
Principal subcontractor Raytheon will develop and build the "kill vehicle" - the missile end that strikes the target.
The Northrop/Raytheon team's reliance on existing technology, Obering reported, was one of the major things that the MDA liked about the two contractors' $10-million, eight-month concept design.
"Our KEI design involved the innovative use of proven systems, providing a new capability for the Missile Defense Agency with a minimum level of risk and cost," Francesconi explained. Raytheon's design employs elements from two of its other existing DOD contracts: the ground-based Exoatmospheric Kill Vehicle and the ship-launched Standard Missile-3 missile.
The KEI, which will be implemented between 2010 and 2012, will eventually launch from both land and sea.
"The initial capability will be ground-based with a planned evolution to sea-basing," MDA Director Lt. Gen. Ronald Kadish wrote in the letter to congressional defense committees announcing the selections to develop and build the KEI.
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©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.