UPDATE 2-Lockheed beats Raytheon to win U.S. 'Space Fence' contract

Mon Jun 2, 2014 8:54pm EDT

(Adds Lockheed comment, byline)

By Andrea Shalal

WASHINGTON, June 2 (Reuters) - Lockheed Martin Corp on Monday beat out Raytheon Co to win a $915 million contract from the U.S. Air Force for a ground-based radar that will track about 200,000 pieces of old satellites and other objects in space.

The Pentagon announced the fixed-price contract for the new "Space Fence," which includes an incentive fee, late on Monday in its daily digest of major contract awards.

The deal covers development and construction of the new radar on Kwajalein Atoll in the Marshall Islands, about 2,100 miles (3,400 km) southwest of Honolulu, with initial operations to start in late 2018.

The deal also includes an option for a second site in western Australia, said Steve Bruce, vice president for advanced systems at Lockheed's Mission Systems and Training Business.

Bruce, speaking with reporters, declined to estimate the total value of the contract, including that option and others, but analysts said it would be worth just under $2 billion.

U.S. officials have underscored the importance of the Space Fence program given the growing number of countries operating satellites in space, China's work on anti-satellite weapons, and the huge amount of debris in orbit around the earth.

The program will increase the U.S. government's ability to track spent rocket boosters, dead satellites and other "space junk" that could damage satellites or the International Space Station, Bruce said.

The Air Force now tracks about 23,000 of an estimated 500,000 objects orbiting the earth, but the new radar will increase that number tenfold.

Brian Weeden, a former Air Force analyst who now works with the Secure World Foundation, said the new system still faced challenges, including the need for new computers to process the larger amount of data that will be collected. "There's a lot that can still go wrong," he said.

Raytheon said it had been notified about the Air Force's decision, but that it would be inappropriate to comment further until after it receives a post-decision debrief from Air Force officials. A company spokesman declined comment on whether it would protest the decision.

Doug Loverro, deputy assistant secretary of defense for space policy, told Reuters last month that the Air Force cut the projected cost of the new radar system by two-thirds by mandating prototypes and manufacturing demonstrations.

Bruce said the Air Force scaled back its requirements as a result of studies conducted by Lockheed and other companies in the early stages of the procurement process, ultimately deciding to use space-based assets to track debris in higher orbits.

"The Air Force did a terrific job of looking at these requirements and coming up with something that's affordable," he said.

Bruce declined to provide Lockheed's expected profit on the deal, or other details of the contract terms, but said the fixed-price deal was unusual for a development project. (Reporting by Andrea Shalal; Editing by Meredith Mazzilli, Matthew Lewis and Mohammad Zargham)