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U.S. Pegs Cost of Halting Deal

January 17, 2006|From Reuters

The U.S. Army probably will pay Lockheed Martin Corp. tens of millions of dollars in contract termination fees for a botched attempt to produce a spy plane meant to serve the needs of both the Army and the Navy, a senior Army official said Monday.

Bethesda, Md.-based Lockheed Martin, the Pentagon's No. 1 supplier, was not at fault in the scrapping of the initial, $879-million contract, said Edward Bair, the Army's program executive officer for electronic warfare and sensors.

Bair said the Army had spent about $200 million on the project before pulling the plug. He said he expected the termination settlement to be in the tens of millions of dollars, with most of it going to subcontractors.

On Thursday, Claude Bolton, the Army's chief weapons buyer, said the Army, Navy, Air Force and industry would review challenges to the aircraft.

Lockheed beat Northrop Grumman Corp. for the August 2004 award of the system design and development contract for the spy plane.

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