Boeing Given Go-Ahead on Spy-Satellite Project

Boeing Co. won approval Tuesday to proceed with a 12-year, multibillion-dollar contract to build the next generation of spy satellites as the Defense Department rejected rival Lockheed Martin Corp.’s effort to halt the award, a government official and an industry aide said.

The Pentagon’s National Reconnaissance Office cited national security needs for Boeing to proceed now with the satellite project, which analysts say ultimately could be worth as much as $15 billion by 2012. The NRO said there’s a “compelling national need” not to delay the contract, the people said.

The choice of Boeing’s Seal Beach-based Integrated Defense Systems unit spells the end of Lockheed’s 40-year U.S. monopoly on building picture-taking satellites. It also comes as Lockheed’s space and strategic missiles business has struggled with launch failures.

“It’s a major coup for us,” Boeing President Harry Stonecipher said at an analysts’ conference in New York last week, of the company’s first foray into intelligence satellites.

Lockheed has two days to appeal the decision in federal court.

No. 1 defense contractor Lockheed filed its protest last week with the U.S. General Accounting Office, which had 100 days to decide if the NRO contract was valid.

NRO Director Keith Hall made Tuesday’s decision to turn aside the protest, with the approval of Deputy Defense Secretary John Hamre, the officials said.

Details about Lockheed Martin’s protest and the Defense Department’s decision to reject it are secret, the officials said.