Pentagon Awards Northrop Grumman Big Bomber Deal

The Pentagon awarded Northrop Grumman Corp. a huge contract to build new long-range bombers for the U.S. Air Force after the market close on Tuesday.

Northrop Grumman Corp. was vying with the team of Boeing Co. and Lockheed Martin Corp. to build an initial 21 jets of the 100 sought by the Air Force to replace aging B-52 and B-1 planes at an estimated cost of $80 billion. The first aircraft are due to enter service in the mid-2020s.

Shares of Northrop Grumman were up 6.3% in after-hours trading.

The new radar-evading bomber is designed to fly undetected into the territory of potential adversaries such as Russia or China that have upgraded their air defenses. The plane is capable of firing conventional and nuclear weapons, becoming the third leg of the nuclear triad alongside submarine and land-based ballistic missiles

The announcement follows what analysts have called the most fiercely fought military-contract contests in more than a decade. It concludes a four-year process clouded in secrecy as most of the bomber's details were highly classified.

Defense Secretary Ash Carter is due to hold a media conference after the contract announcement.

Pentagon officials have in recent weeks provided a few more details on what the Air Force has called one of its top three priorities, alongside the Lockheed-built F-35 fighter and Boeing-built KC-46A refueling tanker.

Analysts said the additional disclosures reflected heightened scrutiny from lawmakers because of the program's huge cost, as well as the likelihood that the loser will protest the initial contract award.

Defense experts had said Boeing or Northrop could be forced to shrink or sell parts of their military aircraft business if they lost.

However, the chief executives of Boeing and Northrop Grumman—which reports third quarter earnings before the market open on Wednesday—have both played down the notion of the bomber contest being transformational to their businesses.

Plans for a new bomber were cancelled in 2009 before being revived shortly afterward, with the proposed planes viewed as more effective than long-range cruise missiles.

Other technologies such as hypersonic jets or swarms of unmanned drones aren't considered to be mature enough, though critics of the bomber plan have said it could become outdated as air-defense technology improves, and didn't address the challenges created by the emergence of new military threats such as Isis.

The bomber plan will be closely watched as the Pentagon and lawmakers try to overhaul the way it designs and builds weapons systems to break a run of cost over-runs and delays.

The Pentagon has capped the average production cost of each bomber at $550 million in 2010 dollars, though this excludes what analysts estimate to be around $20 billion in development funding.

It's also tried to use existing technologies in an effort to reduce costs and risks.

"Just because it's existing technology doesn't mean it's not incredible," Air Force acquisition chief Bill LaPlante told reporters last week.

Previous bomber programs have been severely curtailed because of funding issues. Northrop built only 21 B-2s from an original plan for 132, with a cost of more than $1 billion each.

The Pentagon isn't expected to disclose other suppliers involved in the Northrop and Boeing/Lockheed bids, including who might supply the engines and radars. However, General Electric Co. and the Pratt & Whitney arm of United Technologies Corp. are expected to have offered competing engines, according to industry officials.

Write to Doug Cameron at doug.cameron@wsj.com

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(END) Dow Jones Newswires

October 27, 2015 18:45 ET (22:45 GMT)

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