IBM Wins Over Hughes to Build $3.6-Billion Air Traffic Control System

International Business Machines was awarded a $3.6-billion contract late Monday to build a new national air traffic control system, the Transportation Department announced.

The selection of IBM dealt a sharp defeat to Hughes Aircraft, which was competing for what would have been the largest contract award in the Los Angeles company’s history.

The Federal Aviation Adminsitration judged the technical proposals of both IBM and Hughes as “excellent” and awarded the contract based on cost, according to Leland F. Page, director of the project for the Federal Aviation Adminsitration. “Hughes’ cost was substantially higher,” he said in a telephone interview.

Called the advanced automation system, or AAS, the new air traffic network consists of mainframe computers, radar display terminals and software at 150 airport towers and 23 area control centers across the nation, Page said. Potentially, another 100 airport towers could be equipped with the system.

Years Behind Schedule

The AAS contract represents the largest part of a $16-billion modernization plan to improve the nation’s currently outmoded air transportation system.

The program is years behind its original schedule and is not expected to be completed until past the turn of the century. When the entire system is in place, however, air safety is expected to be greatly increased because of the reduced burden on air traffic controllers and the greater reliability of the new equipment.

The $3.6-billion contract does not include some parts of the AAS system that may eventually be added, but Page said the cost of the system is not expected to substantially increase. Some industry officials have suggested that AAS may eventually grow to a $5-billion to $10-billion program.

Winning the award puts IBM in a lead position to secure sizable foreign business that is expected to develop for air control systems over the next decade. Many foreign air traffic control systems are in even worse shape than the U.S. system, which currently has outdated computers that are subject to frequent outages.

Admits Disappointment

“We are pleased to continue our partnership with the FAA in this important national interest program,” IBM spokesman Jim Elder said, referring to the company’s role during the 1960s in building the existing equipment used by the FAA.

Elder said IBM’s portion of the work will be located in Gaitherburg, Md. Its subcontractors include Raytheon and Computer Sciences Corp. of El Segundo.

Hughes Vice President Lee Pitt said: “Of course, we are disappointed at not having been selected. The four-year development effort resulted in one of Hughes’ most important engineering designs.”

The defeat in the air traffic contract follows the loss of a number of important contract competitions over the past year, including one for the next generation of Intelsat communications satellites and the radar system for the Air Force’s Advanced Tactical Fighter.

But Pitt said the company does not face an erosion of its business base, though the entire market for big-ticket defense and aerospace contracts is becoming tighter as Pentagon budgets shrink.

The company said it currently has 300 employees at its Ground Systems Group in Fullerton assigned to the AAS and will eliminate as many as 240 of those jobs.

“We’ll make our best effort to reassign people to the Ground Systems Group of other parts of the company,” said Joseph A. Capobianco, Hughes program manager for the AAS.

Planned More Hiring

“It is going to be an emotional loss,” he added. “We had such a good team that I think they’ll be able to find jobs with the company.”

If Hughes had won AAS, it would have eventually assigned 700 employees to the program, about half of them new hires, the company said last week. Compared to many aerospace programs, AAS would not have been a big generator of new jobs at Hughes because the company was planning to build very little of the equipment. But AAS carries prestige and offers a lot of revenue.

Pitt, the Hughes spokesman, said in a prepared statement that the company plans “to continue to develop aircraft control technology and will consider competing for international programs in the years.”

Capobianco says Hughes believed that “we were the technology leader in the competition for four years. From what we heard, IBM was always in the mode of catching up. . . . I think we pushed IBM to reach further.”

Another Hughes official said one reason the company’s cost was higher than IBM’s was that it allowed the FAA greater freedom to modify the equipment in the future. IBM’s proposal requires the FAA to use IBM equipment only.

IBM’s task is not expected to be easy. The schedule for developing and installing various elements of the AAS is fast-paced and difficult.

A Major Undertaking

“It is not a luxurious schedule but it is achieveable,” Page said.

IBM will be responsible for writing 1.5 million lines of software, ranking AAS among the largest computerized systems in the world. Unlike other complex automated systems, though, human lives will depend on AAS.

“We really have to have error-free software before we go operational with it,” Page said. “It takes a lot of time to test and debug it.” Under the FAA contract, the hardware for the new system will represent about one-third of IBM’s work and will be built under a fixed-price contract. The software, representing another one-third of the cost of the system, will be developed under cost-plus type contracts. The last third of work will involve IBM supplying the FAA with personnel in the field for supporting the system once it becomes operational.