Systems Upgrading Work Will Proceed On Navy Destroyers , Cruisers

The Government Accountability Office (GAO) denied Raytheon Co. [RTN] protests against several sole-source, non-competitive contracts that the Navy earmarked for Lockheed Martin Corp. [LMT] for modernization of Aegis weapon-control systems on Ticonderoga cruisers and Arleigh Burke Class destroyers.

Raytheon Integrated Defense Systems had requested that the Navy reverse course and hold competitive bidding on the work, with Raytheon challenging three of four Navy sole- source procurements that the Navy said it intended to give Lockheed.

But the GAO denied the Raytheon protest.

While Raytheon would provide competition for the Navy Aegis mod work, that would depend upon working with Lockheed in a deal that doesn’t exist.

Since the Ticonderoga and Arleigh Burke ship classes were designed decades ago, Lockheed has built the Aegis systems that control their missiles and missile interceptors.

But in 2002, the Navy rejected a bid by Lockheed and General Dynamics Corp. [GD] to design and build the next-generation destroyer, DD(X), now called the DDG 1000. Instead, the Navy chose a team of Northrop Grumman Corp. [NOC] and Raytheon to design the huge new ship, with cutting-edge electronics, futuristic weapons such as electric rail guns, and a hull and superstructure design that can evade enemy radar.

Raytheon thus was to build the electronics and weapons control systems on the new destroyers, envisioned at seven ships.

However, this year, with only two of the destroyers under contract, the Navy reversed course and decided to cut production off there. After furious reaction from some members of Congress, however, the Navy relented slightly and agreed to build three DDG 1000s.

But the other four planned new-design destroyers were to be jettisoned in favor of the Navy going back to building more of the previous-design Arleigh Burkes.

Navy officers also have called for modernizing Aegis systems, and for upgrading Aegis systems on a huge number of Ticonderogas and Arleigh Burkes to make them missile defense vessels.

The GAO ruled that giving this sort of work to Lockheed, the builder of Aegis systems, was a reasonable move that makes sense. That means such work can go to Lockheed.

The dispute began May 16 when the Naval Sea Systems Command announced its intent to conduct four sole-source procurements with Lockheed Martin Maritime Systems and Sensors (Lockheed Martin MS2) for the Aegis mod work.

On Sept. 23, Raytheon protested the Navy move to the GAO, the federal government referee agency for contract disputes.

Raytheon asked the GAO to recommend that the Navy should conduct a competitive acquisition for these contracts.

But after reviews and a hearing, the GAO denied the Raytheon protest, finding that the Navy’s use of sole-source contracts for the modernization of ship-based Aegis combat systems was reasonable.

The Raytheon bid protests are numbered N00024-08-R-5110 (file number 400610.1), N00024-08-R-5121 (file number 400618.1), and N00024-08-R-5123 (file number 400619.1), at on the Web.