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Boeing Gets $6.6 Billion From Pentagon To Expand Missile Defense

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Boeing ( BA ) has received a $6.56 billion contract to continue managing the U.S. missile defense system intended to stop North Korean or Iranian intercontinental ballistic missiles, the Defense Department said.

[ibd-display-video id=2326967 width=50 float=left autostart=true] The sole-source contract announced Wednesday extends Boeing's management role for six more years, through 2023, and brings its total contract to $12.6 billion. It includes overseeing the addition of 20 ground-based interceptors to the 44 already stationed in California and Alaska.

North Korean leader Kim Jong Un has vowed to perfect a nuclear warhead and a missile that could hit the U.S. mainland, adding to the urgency of U.S. missile defense efforts. In his State of the Union address on Tuesday, President Donald Trump said, "North Korea's reckless pursuit of nuclear missiles could very soon threaten our homeland. We are waging a campaign of maximum pressure to prevent that from ever happening."

Orbital ATK, Raytheon

Boeing oversees development and support of the network of interceptors, sensors and communications links, sharing funding with subcontractors: Orbital ATK ( OA ) builds the rocket booster, Raytheon ( RTN ) makes the hit-to-kill warhead, Northrop Grumman ( NOC ) provides the battle management system and Aerojet Rocketdyne ( AJRD ) makes the warhead's in-flight guidance system.

The Pentagon released an initial $213.8 million Wednesday as a modification to Boeing's current $6.14 billion management, development and sustainment contract, which expires this year.

As the Missile Defense Agency's prime contractor, Boeing will manage the accelerated construction of a new 20-missile field at Fort Greely, Alaska, plus the additional interceptors. Boeing also will oversee development and integration of an upgraded warhead known as the "Redesigned Kill Vehicle."

Confidence in the $36 billion missile defense system was bolstered last week by a new assessment from the Pentagon's operational testing director based on the successful interception in May of a dummy warhead. The system "demonstrated the capability to defend the U.S. homeland from a small number" of ICBMs launched "with simple countermeasures when the" U.S. employs "its full sensors/command and control architecture," Robert Behler said in a report to top Pentagon officials.

Laura Grego, senior scientist for the Global Security Program of the Union of Concerned Scientists, questioned even that carefully hedged formulation. The system has destroyed "its target fewer than half the 17 times it has been tested, and its record is not improving over time. Since the 2004 deployment decision, the system has a three-for-nine record," including the test in May, she said in an email.

Kim's Claims

On Tuesday, General Paul Selva, vice chairman of the Joint Chiefs of Staff, told reporters that North Korea's capabilities aren't yet as advanced as Kim purports.

North Korea has yet to demonstrate essential capabilities for an ICBM that could hit the U.S. mainland, including maneuvering in space, an adequate guidance system and housing that could protect a nuclear warhead from burning up on re-entry.

The capability gap provides "an opening to have" a conversation with North Korea about a possible missile test freeze, Selva said.

While North Korea's nuclear weapons program is the most advanced threat, Trump has vowed to seek new sanctions on Iran for its continued development of ballistic missiles. Iran maintains it has no intention to develop nuclear weapons, and its nuclear program is constrained by its 2015 deal with the U.S. and other world powers.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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