Give or Take $12 Billion

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In the sometimes cutthroat world of defense contracts, a small mistake can cause a major headache.

In this case, a wording error buried in a lengthy report on boost-phase missile defense caused reports to overstate the sustainment cost of the Army’s Patriot program by more than $11 billion, adding fuel to a long-simmering battle between Raytheon and Lockheed Martin.

And it comes at a critical time for both programs. Raytheon is looking to secure Army dollars into the future for its Patriot system and to increase international sales, particularly to Turkey, but other countries as well. And Lockheed Martin is trying to keep its Medium Extended Air Defense System (MEADS) alive while three different congressional defense committees are trying to shut it down.

In September, a National Research Council (NRC) report, citing figures provided by the Army Air and Missile Defense Lower Tier Project Office, estimated the per battalion cost of operating and sustaining Patriot would be up to $809 million.

Supporters of MEADS latched on to NRC’s initial figure, and multiplying that by the Army’s 15 Patriot battalions estimated the cost of operating Patriot to be more than $12 billion a year. That included David Berganini, president of Lockheed Martin’s MEADS International. Just before the start of the Association of the U.S. Army conference, Berganini wrote a column that ran on AOLDefense.com citing the NRC report’s cost estimates as a reason why the Army should retire the Patriot in favor of MEADS.

But according to an Army document, the actual annual cost of sustaining the entire missile defense system in fiscal 2011 was about $545 million. The NRC’s $14.7-$16.2 billion estimate reflects the cost of operating and sustaining all 15 battalions over 20 years. That would put the annual cost of supporting the Army’s full complement of Patriot battalions at a high of $809 million, the Army document says.

The study’s co-chairman, L. David Montague, is looking into the Army’s response to the report. “Simply put, if there is an error in the cost, we want to set the record straight. And we will revisit it.”

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