Lockheed Spy Plane Deal May Be Rebid

Lockheed Martin Corp.’s contract to develop a new spy plane for the Army may be terminated and the $4.1-billion program reopened to new bidding, a senior Army official said.

Reopening the program to potential bidders such as Boeing Co. and General Dynamics Corp., as well as Lockheed, “is a viable strategy that’s still on the table,” Edward Bair, the official in charge of electronic warfare, said Wednesday. “That’s a tough option but it’s incumbent on me to do what’s right for the program and what’s right for the Army.”

Lockheed beat Northrop Grumman Corp. and General Dynamics in August 2004 for the $879-million contract to develop and assemble the aircraft, which will replace a Northrop-built model used for three decades in conflicts including the first Gulf War.

Bair said he would rebid the program if Lockheed couldn’t convince him that it could provide this plane at a cost and schedule that met the Army’s requirements.

Lockheed Martin spokesman Keith Mordoff said the company was “making good progress with major program developments while we address the airframe issue. Our focus is on working with our customer to bring this revolutionary capability to the warfighter as quickly as possible.”

The proposed plane would perform battlefield intelligence, surveillance and reconnaissance such as eavesdropping on radio transmissions and pinpointing radar locations. The program envisions building as many as 38 planes for the Army and possibly 19 for the Navy.

The plane, however, doesn’t have the space to carry the latest versions of U.S. imagery and signals intelligence equipment the Army requires, Bair said.

The first Army aircraft is now scheduled for deployment in August 2012, two years behind schedule, Bair said. The Army to date has spent $270 million on the project.

Bair said Lockheed had a proposal for a larger airframe that he was examining along with separate reviews of the program by its manager, Lt. Col. Steve Drake, and an independent panel set up by the Navy.

Shares of Lockheed fell 2 cents to $62.24.