BA Boeing Co

By Doug Cameron 

The Pentagon on Monday eliminated Lockheed Martin Corp. from an $85 billion competition to update the nation's land-based intercontinental ballistic nuclear missiles, one of the most fiercely contested defense contracts this decade.

Lockheed said it was "disappointed" to be cut out of the running to lead the Ground-Based Strategic Deterrent program, replacing 400 aging Minuteman III missiles deployed in silos across the Great Plains.

The Pentagon's decision leaves Boeing Co. and Northrop Grumman Corp. to vie for this piece of the three-pronged, $500 billion update of the U.S. nuclear arsenal that has won backing from President Donald Trump. The final contract, expected in 2020, could bring the winning corporation business for 50 years.

The Pentagon doesn't immediately disclose its reasoning in such contract awards but will brief the companies in the coming days. Lockheed could appeal and dispute its exclusion. The company didn't say whether it would do so.

Officials at all three companies have in recent months expressed concerns that the Pentagon could choose the cheapest offering rather than the one with the best technical merits. The Pentagon several years ago introduced a system of awarding some contracts on a so-called lowest price, technically acceptable basis that drew widespread criticism from some companies that said rivals deliberately underbid for deals. The Defense Department was then left to pick up additional costs.

The department has since changed some of its buying practices, focusing instead on securing "best value" as well as affordability. Lawmakers are weighing reforms to the acquisition system.

The new missiles are part of a nuclear arsenal overhaul that also includes a long-range bomber being built by Northrop Grumman and new nuclear submarines now under construction by General Dynamics Corp.

A joint bid by Boeing and Lockheed for the bomber deal lost to Northrop's cheaper offering. Boeing has undertaken steps to improve its competitiveness in securing big Pentagon deals, cutting management layers and eliminating costs.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

August 21, 2017 19:58 ET (23:58 GMT)

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