Lockheed Missile Program Dodges a Congressional Bullet

(MoneyWatch)  The Joint Air-to-Surface-Standoff Missile (JASSM) developed and produced by Lockheed Martin (LMT) for the U.S. Air Force and Navy has been a troubled program. Originally configured as a guided, medium-range, air-launched cruise missile, the system went into production in 1999. It was designed to be launched from a variety of aircraft and to replace older-cruise missile systems for attack on high-value, mainly fixed targets such as air defense sites, headquarters and industrial plants.

In the early part of this decade, the Pentagon decided to develop a longer-range version of the missile, the JSSAM-ER. The JASSM-ER began testing in 2006 and was supposed to enter service last year. But the missile performed badly, with poor accuracy and a high rate of system failures. As late as last September, the failure rate in testing was forty percent.

Though the Air Force went ahead with both versions and almost a thousand missiles had been built by 2009, Congress was not happy to hear about rising costs. The program teetered on the edge of being canceled.

The Air Force stopped paying for the last production contract late last year while Lockheed and its sub-contractors pored over the design and worked on fixes. The missile is intended for long-range strategic strike missions of the kind rarely called for in Afghanistan and Iraq, which was one of the reasons Congress was ready to spike it. But that profile turned out to be a benefit to Lockheed: Because the missile was not needed in action right away, there was time to work out the glitches.

In the last round of testing, completed three weeks ago, the missile began to perform better and the Air Force decided on February 8 to put it back into production -- $1 billion worth, over the next five years. So far, 650 have been delivered, and Lockheed has a contract for another 500. If the missile continues to improve its performance Lockheed could be looking at another 3,000 produced at a cost of over $4 billion. There will also be money to service and upgrade the missiles once they are deployed.

In this case, then, it looks like Lockheed has dodged a bullet -- or perhaps a missile.