By Marina Malenic

Raytheon [RTN] and ATK [ATK] have each received an 18-month Army development contract to compete to produce the next increment of the Excalibur 155mm precise artillery round, company representatives said this week.

Each company received about $10 million to develop a new shell over 18 months. After they demonstrate their products at Yuma Proving Ground in Arizona, the Army will select one competitor for a 30-month system qualification and then a three-year production contract. The Army plans to field the new rounds in 2012.

Raytheon has worked for more than eight years on the system. Together with Sweden-based BAE Systems Bofors, it developed the original version, which was fielded last year. The Army has said that Excalibur Ia was used last summer to kill Abu Jurah, a top al-Qaeda leader in Iraq.

The Army now wants to develop a new version of Excalibur that will be significantly cheaper than the original, whose cost has been estimated at over $100,000 per round.

“The Army has said they want something in the thirty to forty thousand dollar range,” David Brockway, Excalibur business development director for Raytheon, said during an Oct. 6 interview on the sidelines of the Association of the U.S. Army’s annual Washington conference. “And that’s what we’re going to give them.”

And while the original version has consistently demonstrated better than 10 meter accuracy within 70 meters, the next increment will have even better range and reliability, according to Brockway. An artillery shell without GPS guidance can miss its target by 800 feet or more.

Brockway explained that the new Excalibur will use fewer parts, which will lead to lower costs and better reliability.

Last month, Raytheon received another $85.3 million Army contract for Excalibur production. A $48.4 million production contract was awarded in November 2007.

Sources said a three-year production contract for the next increment could be worth more than $350 million.

Excalibur 1A production will continue until the 1B is ready, according to a statement released by Picatinny Arsenal, N.J. The shells have a 20-year shelf-life.

Earlier this year, Raytheon won a $232.3 million contract to develop the Army’s 120mm XM 1111 Mid-Range Munition, a smart tank shell. ATK was also competing for the contract.