"Lockheed's star war is dud so far:

Anti-missile missile hasn't hit a thing in four expensive tests; It may lose program to rival; Firm's reputation is on the line in bid for even larger program"

The Baltimore Sun, 4/19/98
By Greg Schneider Sun Staff

During the first part of May, something is supposed to explode over the high desert of New Mexico. It could be a pair of missiles colliding at a combined speed four times faster than a bullet. Or it could be the reputation of America's biggest defense contractor.

Lockheed Martin Corp. of Bethesda, whose slogan is "Mission Success," has failed to hit the target in four previous tests of a new Army missile designed to knock enemy rockets out of the sky.

Congress has ordered the Pentagon to develop such a weapon because American troops are all but defenseless against the ballistic missiles of rogue nations such as Iran. If this next test fails -- and each one costs tens of millions of taxpayer dollars -- it is uncertain whether Lockheed Martin will get another chance to make it work.

To crank the pressure up even higher, the Pentagon is scheduled to announce almost simultaneously next month the winner of a landmark contract to assemble a missile defense system for the entire country.

The candidates are Boeing Co. and a joint venture of Lockheed Martin, Raytheon and TRW. With ballistic missile defense the kind of lucrative, politically prominent market that Lockheed Martin prefers to dominate -- worth $4 billion next year -- May is shaping up as an unusually important month for the company.

Dual successes would give Lockheed Martin unparalleled status. Failures, especially in light of the company's court battle with the government over plans to buy Northrop Grumman Corp., would mark a corporate low point and raise questions about Lockheed Martin's ability to manage complex systems.

"Clearly there were problems in terms of quality" on the Army missile program, Pentagon acquisitions chief Jacques Gansler said in an interview. "One might call that management issues. My impression is they're trying to address those. We'll see."

For an annual report to Congress last week on the Army missile system, called the Theater High-Altitude Area Defense program, or THAAD, Gansler had his staff consider an option that would be particularly humiliating to Lockheed Martin: bringing in another company to compete for, take over or clean up the troubled system. "It was analyzed and we decided not to. Of course, we can always revisit that," Gansler said.

Lockheed Martin has taken a year since its last failure to test each component of the THAAD system. "We are scrutinizing this thing a lot tighter than we have in the past," said the company's program manager, a plain-talking retired Army general named John H. Little.

He said he will postpone the test up to the last moment if anything appears out of whack. The launch has already been delayed twice, having been scheduled originally for December. Another failure and, "I know the government will not be very happy," Little said. "I know I will get wire brushed pretty good and Lockheed Martin will get wire brushed pretty good."

Making one rocket strike another on the fringes of space is a hard thing to do. Scientists have been trying to figure that out since President Ronald Reagan unveiled the "star wars" program in 1983. Over those 15 years, the nation has spent about $50 billion developing the technology. After all that investment -- more than the Pentagon spends in one year on all new aircraft, Navy vessels and weapons systems combined -- there is still no working system.

"The thing has consumed 50 percent more than the stealth bomber program and they've got nothing to show for it. We're talking nothing," said John Pike of the Federation of American Scientists, who has long criticized the effort.

Anti-missile missiles come under the aegis of a Ballistic Missile Defense Organization, or BMDO, and is divided into two categories: Theater missile defense, where THAAD is a key component, means shooting down ballistic missiles that threaten troops in the field. National missile defense means protecting the continental United States. Compared with Reagan's original goal of an umbrella in space to stop Soviet warheads, the current national defense plan is modest. About 20 missiles housed in one central complex -- possibly in North Dakota -- would counter the odd terrorist shot or accidental launch. The government would like to deploy it as soon as 2003. Even that limited plan involves a mind-boggling network of satellite sensors, ground radar systems and computer links. To save money, the Pentagon wants to hand over assembly of that system to a private company.

That contract, for what's called the National Missile Defense Lead Systems Integrator, will be awarded during the first week of May. It could be worth more than $10 billion.

Lockheed Martin formed a new company with its partners Raytheon and TRW to seek the job. Their United Missile Defense Co. is considered a heavy favorite over Boeing, because the three partners already are working on major components of the system while Boeing has little experience.

"Our three companies have most of the expertise in the United States on ballistic missile defense technologies and programs. In fact, we have almost all the programs, with the exception of one [relatively small] contract held by Boeing," said William C. Loomis, a former Lockheed Martin executive who is president and chief executive of United Missile Defense. Lockheed Martin dominates its two partners in the field, and experts say the company has made ballistic missile defense a priority.

"This is an emerging market and clearly one that Lockheed Martin is looking to expand as one of their key markets of the next century," said Brett Lambert, an industry analyst with the defense consulting firm DFI International. Losing the national missile defense contract would not cripple the company, because it already has so many of the component contracts, Lambert said. But, he added, it would be a huge moral victory for Boeing.

Some experts say the Seattle company could be the better choice. As Pike put it, a Boeing 747 jetliner is nothing but a huge system put together from thousands of components. That's just the type of systems integration demanded by a national missile defense network. But Lockheed Martin's skills in that area have come under scrutiny because of its problems with THAAD.

Even though Lockheed Martin is only a third of United Missile Defense, "their lack of performance on THAAD could have some negative bearing" on the national missile contract, said financial analyst Paul Nisbet of JSA Research Inc.

A Pentagon panel released a report in late February that criticized the nation's ballistic missile defense programs in general, and THAAD in particular, for what it called a "rush to failure" brought on by unrealistic pressures to hurry and develop. "The THAAD program office also expressed concerns with the contractor program management. Again, the root causes were associated not only with the technological challenge but also with the basic set of disciplines essential to success in developing and testing complex systems," wrote the panel, which was chaired by retired Air Force Gen. Larry Welch. The Welch Report, as it is known, went on to say that similar problems could put the national missile defense system at risk.

Rep. Curt Weldon, a Pennsylvania Republican who heads a key defense subcommittee, was angered by the report and said the technology has mainly suffered from poor public relations.

THAAD has had seven tests, including four in which the missile was actually fired at a target rocket. Only the first test, of the missile's engine, was considered a success. But Weldon says the Army has done a poor job of explaining that even the "failures" contributed a great deal of knowledge about the technology. "If THAAD has another unsuccessful test," he warned, "some members of Congress, I think, will try to kill the program."

No one feels that pressure more than Little, the Lockheed Martin program manager. "When we started out, the people who put it together said they were willing to accept risk because they wanted the capability quickly. I think that eroded with the tightening of the defense budget," Little said.

Originally, THAAD was going to be test-shot once a month for two years. That's too expensive today. Under certain scenarios, Little could still hold his head up even if the next shot misses. Simply completing the test sequence without a system failure would produce valuable information.

Just to be safe, Little said he will bring "every good luck charm I own" to the White Sands, N.M., test range early next month.