Lockheed Martin/Raytheon and Boeing/Northrop Grumman have each submitted proposals to the U.S. Missile Defense Agency (MDA) for the Ground-Based Missile Defense (GMD) development and sustainment contract.

A downselect is expected May 31. The deal could be worth up to $10 billion if all 10 years of options are exercised, and the work will involve sustainment of the GMD system, development of new capabilities, flight testing and disposal of outdated components. The initial contract period is for seven years; annual value is estimated at $600 million.

Boeing is the current prime contractor for GMD and its Ground-Based Interceptor, which are fielded in California and Alaska primarily to guard against a ballistic missile attack from North Korea. However, the company’s record upgrading, testing and sustaining the system has been marred by problems, prompting MDA to shop around for an alternative.

The last two GMD tests in January and December of last year failed to produce intercepts against the most challenging target to date, Lockheed Martin’s LV-2, which can deploy countermeasures. The last successful GMD test took place Dec. 5, 2008. It is unclear whether these failures will factor into Boeing’s past performance rating in the competition.

MDA’s source selection will have a significant effect on the missile defense market landscape. As the Defense Department winds down purchase of the ground-based intercepters and limits the Boeing-led Airborne Laser, Boeing’s role in missile defense stands to shrink substantially if it cannot hold onto the GMD contract.

A Lockheed win would not only edge Boeing out of a substantial part of the business but would also break the trend that the original equipment manufacturer is entitled to decades of sustainment revenue without competition.