Lockheed team wins $70 billion fighter contract Deal called biggest aerospace order ever


WASHINGTON -- A contracting team led by Lockheed Corp. won a historic high-stakes contest yesterday to supply the Air Force with a $70 billion arsenal of sophisticated fighter jets, known as the Advanced Tactical Fighter, well into the next century.

The team -- which includes Boeing Co. and General Dynamics Corp. -- beat out a rival partnership of Northrop Corp. and McDonnell Douglas Corp. for what Air Force officials called the largest aerospace contract ever. Both teams spent five years and a total of $1.4 billion developing and testing prototype aircraft in competition to secure the lucrative military business.

"One combination clearly offered better capability at lower cost," said Air Force Secretary Donald B. Rice,who waited until after the stock markets closed to announce the winners.

Mr. Rice also named the Pratt & Whitney Division of United Technologies Corp. as the winner over General Electric Co. in a competition to build engines for the new jet, dubbed the F-22 Lightning 2. The cost of those engines are included in the aircraft program's estimated price tag of $70 billion in fiscal 1992 dollars.

The Lockheed team will develop the next generation of "air superiority" fighter, replacing the McDonnell Douglas F-15 fighter with a jet that combines radar-eluding "stealth" technology, agility, state-of-the-art electronics and the ability to "supercruise," or fly at supersonic speed without the use of afterburners.

The Air Force sought bids on a program for 750 aircraft over the next two decades, but Mr. Rice confirmed that purchase orders may be cut to 648 to accommodate fewer tactical fighter wings after 1995. Production is expected to start in 1996 and end in 2014.

Although the Lockheed team was the low bidder for a $12.8 billion full-scale development contract for the ATF, the Air Force also rated it superior in technical areas and in program management, Mr. Rice said. The Lockheed version of the ATF also would be easier to maintain than the competing version, he added.

The losers apparently were hurt by a record of military procurement scandals and fiascoes. Last year, Northrop pleaded guilty to 34 counts of falsifying test results in its work on the air-launched cruise missile and the AV-8B Harrier fighter jet.

McDonnell Douglas is still reeling from Defense Secretary Dick Cheney's decision in January to cancel the Navy's A-12, a carrier-based stealth fighter, because it was over budget, overweight and way behind schedule. Criminal and congressional probes into the A-12 contract have been under way for months.

Mr. Rice said Air Force officials examined each firm's "prior performance on contracts" including ability to control costs, meet schedules and comply with overall performance standards. But he insisted that this evaluation did not by itself tip the decision in the Lockheed team's favor.

The winners clearly did not have unblemished records. Lockheed, which gained notoriety for $600 toilet seats and cost overruns with the C-5 transport plane, was declared by the Navy last year to have defaulted on a contract for the P-7A antisubmarine warfare plane. General Dynamics was McDonnell Douglas' partner in the Navy A-12 debacle.

The ATF project attracted most of the aircraft manufacturing giants, and industry officials said the results are likely to precipitate a reshaping of the industry, which has been struggling to cope with declining military sales, smaller defense procurement budgets and recent cancellations of major weapons systems.

While the Lockheed team could go on to dominate the industry, the losing firms could face further erosion of their military aircraft business, departure of their engineering talent and even bankruptcy.

Shortly after yesterday's ATF announcement, McDonnell Douglas announced it would cut 500 jobs by the end of the year.

Mr. Rice said financial strength of the competing firms was not considered in choosing the winning ATF contractors. "There is still a substantial funding base for the aircraft industry out there, he said, citing Northrop's contract to build a fleet of B-2 Stealth bombers. "Whether it will sustain the same number of companies, we'll have to leave to market forces over time," he declared.

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