Boeing’s decision to drop out of the bidding for a next-generation missile contract it believes is weighted in a rival’s favor may force the Pentagon to reconfigure the $85 billion weapons project.
The Ground-Based Strategic Deterrent program is intended to be a successor to about 400 existing Minuteman III intercontinental ballistic missiles, introduced in the 1960s, and the Air Force said earlier this month it hoped to award a contract to either Boeing or Northrop Grumman in 2020. The new missiles are a vital piece of President Trump’s goal of modernizing the U.S. nuclear triad, which also includes sea- and air-based weapons.
Boeing, however, worried that Northrop’s purchase of Orbital ATK and its solid rocket motors business would give it an unfair advantage, Inside Defense reported. The motors, versions of which were used on the space shuttle, power ballistic missiles’ flights to their target, and Boeing doesn’t produce them.
“We’ve evaluated these issues extensively, and determined that the current acquisition approach does not provide a level playing field for fair competition,” Jerry Drelling, a spokesman for Boeing, said in a statement to the Washington Examiner.
The planemaker had proposed that the Air Force either provide solid rocket motors for the new missiles or exclude them from the price evaluation, said Roman Schweizer, an analyst with Cowen Washington Research Group, and the service may now have to alter the project’s structure.
“We’ve been skeptical about the acquisition strategy since the beginning,” he added. “A massive generational winner-take-all could have seriously negative implications for the losing side of the industrial base.”
Boeing supporters in Congress “will no doubt be fired up about this,” Schweizer said, and are likely to summon Defense Department representatives to a hearing to explain the strategy. A Pentagon spokesman didn’t respond to a request for comment on Friday, nor did representatives for Sens. Tim Kaine and Mark Warner, who are from Virginia, where Boeing’s defense business is headquartered.
Stipulations imposed on Northrop Grumman by the Federal Trade Commission before signing off on the $7.8 billion purchase of Orbital in 2018 may prove to be another wrinkle, Schweizer said. Worried that the merger would give Northrop an incentive to either withhold rocket motors from competitors or raise prices, the agency required the buyer to agree that it would create a firewall between Orbital and its other businesses and sell the rocket motors on a nondiscriminatory basis.
The new missile program, a massive one, “was the first one out of the gate to test that agreement, and it sounds from Boeing’s perspective that it didn’t work,” Schweizer said. Boeing’s intention appears to be getting the U.S. Air Force to change the bid structure rather than just complain, he explained.
Should new Defense Secretary Mark Esper intervene, the award would, at a minimum, be delayed beyond the late 2020 target date, Schweizer said. “Moreover, because Congress opposes sole-source awards, it could well get involved.”
Northrop Grumman CEO Kathy Warden, however, was optimistic about the project earlier this week, highlighting her company’s decades of work on missile systems.
“We have the knowledge and the expertise needed to put together a strong offer for the U.S. Air Force, and we look forward to doing that,” she said. “We are seeing what we expected to see” in the contract proposal, she added, and “view this as as a strong opportunity for our company.”
U.S. defense officials say upgrading nuclear-weapons capability is an increasingly crucial need, given Russia’s testing of new cruise missiles and nuclear-armed submarines. The Kremlin is also modernizing its arsenal of about 2,000 smaller nuclear weapons including depth charges, land mines, and artillery shells, Undersecretary for Acquisition Ellen Lord told the Senate Armed Services Committee in May.
“After 25 years of primarily drawing down and sustaining the nuclear forces we built during the Cold War, repeated decisions to defer recapitalization of our nuclear forces have caught up to us,” she said. “The U.S. must make a choice: Either we continue to invest in modernizing and replacing these systems or we accept the loss of our ability to deter the most severe threats to our nation and our allies and partners.”
