The U.S. Army said it has delayed a decision on whether to revoke Lockheed Martin Corp.’s contract for a new spy plane that may cost $4.1 billion.
Lockheed, the largest U.S. defense contractor, had planned to use an Embraer EMB-145 airframe to house the equipment needed for battlefield intelligence and surveillance missions such as eavesdropping on radio transmissions. But the plane is too small for the 15,000 pounds of equipment.
More than 40 percent of the work on the plane is performed at Lockheed’s Deer Creek facility in Jefferson County, and about 300 people work on the program in Colorado.
Lockheed, based in Bethesda, Md., was given 60 days to “resolve ongoing issues with the program” and prove whether it can provide a plane capable of meeting the requirements, a statement from the Army Communications, Electronics and Life Cycle Command said. The program may be delayed by about two years and have “significant” cost increases.
“We didn’t deliver efficiently, effectively and well for our customer a complete and durable Aerial Common Sensor system solution,” Robert Stevens, chief executive of Lockheed, said earlier Wednesday at a Morgan Stanley-sponsored investor conference in Phoenix. “In this case, we did not do a sufficiently good job.”
Shares of Lockheed fell 34 cents to $62.19 in New York Stock Exchange composite trading. They’ve risen 15 percent in the past year.
“Although we’re issuing a stop-work order, it is important to note that we’re not terminating the contract at this time,” Edward Baird, the Army’s top civilian for electronic warfare programs, said in the statement.
The Army wants the plane, called the Aerial Common Sensor, to replace Northrop Grumman Corp.’s Guardrail aircraft, which has been in use for three decades.
Lockheed beat incumbent Northrop for the new program in 2004.
The projected weight problem was discovered in April, after the program entered a detailed design-review phase.
