Boeing [BA] has won the competition to continue work on the Ground-based Midcourse Defense element of the ballistic missile defense system (BMDS), the Pentagon announced Friday, holding off a challenge by Lockheed Martin [LMT] for control of the lucrative program.

Boeing teamed up with Northrop Grumman [NOC] while Lockheed Martin had partnered with Raytheon [RTN]. The contract is to provide development, manufacturing, test, training, performance-based logistics, operations and sustainment of the GMD, which is designed to engage and destroy limited intermediate- and long-range ballistic enemy missiles in the mid-flight.

The seven-year development and sustainment contract (DSC) is valued at $3.48 billion, the Pentagon’s Missile Defense Agency (MDA) said. Boeing has been the GMD primary contractor since 2001. A loss to Lockheed Martin would have been a major blow.

More than 20 interceptor missiles have been deployed at Fort Greely, Alaska and Vandenberg Air Force Base, Calif. under the GMD system, according to MDA. Additional work on the system will also take place at Schriever Air Force Base, Peterson Air Force Base and Cheyenne Mountain Air Station.

The request for proposals (RFP) was released in Dec. 2010 and an award had been expected in May. But the MDA pushed that back to the end of the year.

"Today’s award is the culmination of a two-year proposal process that brought together a broad industry group committed to delivering innovative solutions and a cost-effective approach to program management and execution," said Dennis Muilenburg, president and CEO of Boeing Defense, Space & Security. "We are privileged to have been partners with the Missile Defense Agency through development and deployment of the GMD system, and now with Northrop Grumman, we are honored to continue that partnership in this next phase of the program."

Boeing will oversee GMD development, integration, testing, operations and sustainment activities. Northrop Grumman will be responsible for ground system elements and support in operations and sustainment, system engineering and system testing, Boeing said.

The Boeing-Northrop Grumman team also included: Alaska Metrology Calibration Services Inc., All Points Logistics Inc.; Davidson Technologies Inc., Delta Industrial Services Inc., DESE Research Inc., Dynetics Inc., Harris Corp. [HRS], Issac Corp., Jeskell Inc., nLogic,, Orbital Sciences Corp. [ORB], Oregon Iron Works, Penta Research Inc. , Raytheon Missile Systems, Trident Group Inc., and Victory Solutions Inc..

The Lockheed Martin-Raytheon GMD team included Alaska Aerospace Corp., ARES Corp., ATK [ATK], Bechtel National Inc., Bluespring Software, CohesionForce Inc., Dynetics Inc., Harris Corp., Imprimis Inc., IroquoiSystems Inc., Mission Solutions Engineering, NANA Development Corp.’s ASTS-Akima Logistics Services Joint Venture, Northrop Grumman Information Systems as an original equipment manufacturer (OEM) provider, Orbital Sciences Corp., Oregon Iron Works Inc., Quadrus Corp., QuantiTech Inc. and TDX Power Inc.