US Air Force revamps Raytheon missile contract, resumes payments

Thu Dec 20, 2012 3:55pm EST
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By Andrea Shalal-Esa

WASHINGTON Dec 20 (Reuters) - The U.S. Air Force said on Thursday it has restructured a troubled air-to-air missile program run by Raytheon Co, freeing $104 million in immediate funding for the company and putting the program on track to return to its original schedule by mid-2014.

Lieutenant General Charles Davis, the top Air Force official in charge of acquisition issues, said the two sides reached agreement last week on new contract terms that will pay Raytheon for delivery of actual missile rounds rather than the "performance-based" milestones used in the past.

"That gets us back to where we would have been ... roughly in the middle of 2014," Davis told Reuters in an interview at his Pentagon office.

He said the Air Force would continue to keep close tabs on Raytheon's AIM-120 Advanced Medium-Range Air-to-Air Missile (AMRAAM), which is used by Air Force fighter jets and Navy planes that fly off carriers.

"At this point right now the only thing that's important ... is the delivery of the missiles," Davis said, describing the Air Force's decision to withhold funds from Raytheon "very prudent" after repeated failures of the missile's rocket motors.

After years of delays in missile deliveries, the Air Force announced in March that it was withholding $621 million in payments from Raytheon until the company accelerated deliveries of the advanced missiles.

On Thursday, the Air Force said it was resuming payments to Raytheon after a 10-month pause from February to December 2012. Spokesman Ed Gulick said no additional funding was being withheld from Raytheon at this point.

The delays were caused by problems with solid rocket motors supplied by Alliant Techsystems Inc (ATK) that power the missiles, prompting Raytheon to switch to Norwegian ammunition supplier, Nammo.   Continued...