EXCLUSIVE-UPDATE 1-Navy paying premium on Northrop plane-sources

Mon May 12, 2008 11:04pm BST
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By Andrea Shalal-Esa

WASHINGTON (Reuters) - The U.S. Navy estimates that a new Northrop Grumman Corp (NOC.N: Quote, Profile, Research) unmanned patrol plane will cost $5.3 billion more to buy and operate than a smaller plane offered by losing bidder Lockheed Martin Corp (LMT.N: Quote, Profile, Research), two sources familiar with the award told Reuters on Monday.

The unprecedented size of the price differential was a major factor in Lockheed's decision last week to protest the Navy contract for its Broad Area Maritime Surveillance program, according to one source, who spoke on condition of anonymity.

Boeing Co (BA.N: Quote, Profile, Research), the other losing bidder, opted not to protest.

Northrop's winning bid, based on a variant of its successful high-altitude Global Hawk unmanned plane, was estimated to cost $21.1 billion, including design, development, production, and operation and support over the longer term, said a second source, citing documents that detailed the Navy's assessment of the rival bids.

Both sources said that was $5.3 billion more than the Navy's estimate of the lifetime cost of the Lockheed bid, which offered a variant of the Predator unmanned plane built by General Atomics, a privately held San Diego-based company.

The Navy estimated development and production costs for the Northrop plane at close to $8.6 billion, exceeding those of the Lockheed plane by more than 200 percent, the sources said.

Lockheed last week said it decided to file a protest with the U.S. Government Accountability Office (GAO) after Navy officials told the company its proposal met the technical requirements at a "significantly" lower cost.

A Lockheed spokesman declined to comment on the difference in price. Navy spokesman Lt. Clay Doss also declined to comment on cost details. The Navy considered all bids "fairly, equally and in full compliance" with federal regulations, he said.  Continued...

 
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