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Raytheon, Lockheed Will Share 2 FAA Contracts

June 29, 2002|From Bloomberg News

Raytheon Co. and Lockheed Martin Corp. will share two Federal Aviation Administration contracts with a combined value of $2.7 billion to settle a complaint over the handling of one of the project awards, company and government officials said Friday.

The agreement gives Raytheon a piece of a $1-billion project awarded to Lockheed Martin to improve computer software in 20 FAA centers that direct planes at high altitudes.

Lockheed gets to be a subcontractor in a $1.7-billion upgrade of software and processors at 173 centers at or near airports that guide planes within 50 miles of takeoff and landing. Spokesmen for both companies declined to disclose the value of the participation in each other's contracts.

The Raytheon project, called the Standard Terminal Automation Replacement System, or STARS, started in 1996. The start of the Lockheed project, called the En Route Automation Modernization Program, or ERAM, had been delayed while the companies and the FAA worked to settle the dispute.

"We asked Raytheon and Lockheed Martin to work this out, and they came to us with a good proposal that now allows us to begin modernizing," FAA spokesman Scott Brenner said. The FAA must finish the upgrade by 2008 because the computers it uses no longer will be compatible with other software the agency plans to use.

Shares of Lexington, Mass.-based Raytheon, the third-largest U.S. defense contractor by sales, rose 65 cents to $40.75 on the New York Stock Exchange. Bethesda, Md.-based Lockheed Martin, the largest defense contractor, fell $1.93 to $69.50, also on the NYSE.

The FAA last year said it planned to give a no-bid award for ERAM to Lockheed because the company had years of experience with the system that reduced the risk of technical, cost and scheduling problems. Raytheon protested, and the FAA in March said the companies would compete for the project.

Raytheon protested again that same month, saying the "playing field" wasn't level with Lockheed. Raytheon declined then and now to say why it believed the competition was unfair.

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