WASHINGTON (Reuters) - Boeing Co (BA.N) and Lockheed Martin Corp (LMT.N) will team up to bid on a new U.S. Air Force long-range bomber program, a multibillion-dollar project that U.S. Air Force officials have described as a top acquisition priority.
Boeing, which has played a role in every U.S. bomber program since World War Two, would be the prime contractor on the next-generation bomber program, with Lockheed as its primary subcontractor, the companies said on Friday.
The Air Force has said it plans to buy as many as 100 new bombers for no more than $550 million each. Air Force spokesman Ed Gulick said $581 million had been spent on the Long-Range Strike Bomber (LRS-B) program to date, starting in fiscal 2012.
“The LRS-B is a top modernization priority for the Air Force and critical to our national security,” he said. “The Air Force looks forward to working with all participating industry partners on this very important program.”
Gulick had no immediate comment on the pact between Boeing and Lockheed. The Air Force estimate of $550 million a plane reflects only the procurement cost of the new weapons, but not the cost of developing the plane or construction of new hangars.
In July, Defense Secretary Chuck Hagel vowed to protect several weapons programs, including the new bomber program, if Congress failed to reverse mandatory budget cuts and the military opted to preserve high-end capabilities over size.
Northrop Grumman Corp (NOC.N), maker of the B-2 stealth bomber, is also expected to compete to build the new long-range strike bomber, a program that’s expected to reap billions of dollars of revenue for the winning bidder.
Northrop spokesman Randy Belote declined to comment on the Boeing-Lockheed teaming agreement but said his company viewed the bomber program as “vital to both national security and the power projection capability of the U.S. Air Force.”
The teaming agreement brings together the Pentagon’s two largest suppliers: Lockheed, ranked No. 1, and Boeing, the second-largest, which some analysts said would present Northrop with stiff competition.
“A Boeing-Lockheed teaming arrangement leaves Northrop as the odd man out,” said Virginia-based defense consultant Loren Thompson. “It would be tough for Northrop to compete against a Boeing-Lockeed Martin bomber team, which would have greater resources and probably a greater ability to bid aggressively.”
Still, Brett Lambert, who retired as the Pentagon’s top industrial base official in August, told Reuters he did not think there was a favored bidder at the moment.
“The department is looking at this as an absolute necessity and they are absolutely committed to a competition. They haven’t penciled anyone in,” he said. “That’s the great thing about competition: it often surprises you.”
Lambert said it was a major accomplishment that the new bomber had survived recent budget cuts, given mounting pressure to cancel new programs. Top Pentagon leaders had made a concerted effort to continue funding initial design work on the bomber program to ensure that all three companies were able to maintain teams of design engineers, he said.
“The easy solution, given the budget environment would have been to terminate the program, but the department made a conscious decision to keep the design teams in place,” he said.
Lockheed and Boeing had teamed up in 2008 to develop a joint bid for the bomber, but parted ways two years later. Then-Defense Secretary Robert Gates had put the program on hold in 2009 and asked the Air Force to find a more affordable approach.
In a statement, Boeing said the team would benefit from nearly two centuries of combined experience in designing, developing and testing aircraft for militaries around the world.
Orlando Carvalho, executive vice president of Lockheed’s aeronautics division, said the teaming agreement would help the companies “affordably design, develop, produce and sustain” a new bomber that met the Air Force’s budget and schedule requirements.
Shares of Boeing, Lockheed and other major defense contractors traded higher Friday after a round of better-than-expected recent earnings in the sector.
Lockheed shares were up more than 1 percent at $133.81 on the New York Stock Exchange, while Boeing shares were up 1.6 percent at $131.04. Northrop shares rose 0.8 percent to $108.34.
Editing by Gunna Dickson, David Gregorio, Bernadette Baum and Ken Wills