Boeing Co beat out Lockheed Martin to retain its position as the prime contractor for the U.S. long-range missile shield, the Pentagon said on Friday.

The U.S. Defense Department said it was awarding Boeing a $3.48 billion, seven-year contract to develop, test, engineer and manufacture missile defense systems.

A team led by Lockheed Martin Corp and Raytheon Co had vied with Boeing to expand and maintain the Ground-based Midcourse Defense, or GMD, hub of layered antimissile protection.

Boeing partnered with Northrop Grumman Corp to retain the work.

"We believe the government conducted a fair and open competition, making the right decision for the future of the program," Norm Tew, Boeing vice president and program director of GMD, said in a statement.

Lockheed said it was "honored" to have participated on the bid, a company spokesperson said in a statement on Friday.

The GMD contract's value to Boeing will have been about $18 billion from January 2001, when it formally became the system's prime contractor, through the end of this year, Boeing has said.

GMD uses radar and other sensors plus a 20,000-mile fiber optic communications network to cue interceptors in silos at Fort Greely, Alaska and Vandenberg Air Force Base, California.

The shield has been shaped initially to guard against ballistic missiles that could be fired by Iran" href="http://www.reuters.com/places/iran">Iran and North Korea. It is the only U.S. defense against long-range missiles that could be tipped with chemical, biological or nuclear warheads.