(Reuters) - The U.S. Air Force has awarded Boeing Co and Northrop Grumman Corp separate contracts to continue work on the replacement of the aging Minuteman III intercontinental ballistic missile Ground-Based Strategic Deterrent, the Pentagon said on Friday.
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Though the award comes amid rising tensions with North Korea, the Air Force asked the defense industry last summer for proposals to replace the Minuteman III and the nuclear cruise missile as the military moved ahead with a costly modernization of its aging atomic weapons systems.
"The Minuteman III is 45 years old. It is time to upgrade," Air Force Chief of Staff General David Goldfein said in a statement on Monday.
Northrop Grumman was awarded $328 million, and Boeing will get $349 million over the three year duration of the contract.
The relatively small award is a milestone that will allow Boeing and Northrop to continue parallel detailed development and prototyping for the Minuteman replacement. The Pentagon's office of Cost Assessment and Program Evaluation (CAPE) has said the total cost could top U.S. $85 billion. The Air Force has estimated $62 billion.
Lockheed Martin Corp, Northrop and Boeing were all competing for the contract which is needed to perform the three-year technology maturation and risk reduction (TMRR) phase of Minuteman replacement.
A Lockheed representative said the company was "disappointed" and looked "forward to a debrief about the selection."
Boeing is the incumbent on the current Ground-Based Strategic Deterrent (GBSD) program.
Leanne Caret, the CEO of Boeing's Defense, Space & Security business, told Reuters at the Paris Airshow this summer that she had her sights set on winning the contract for GBSD replacement.
Northrop Grumman's chief Wes Bush said, "We look forward to the opportunity to provide the nation with a modern strategic deterrent system that is secure, resilient and affordable."
Secretary of the Air Force Heather Wilson said "we are moving forward with modernization of the ground-based leg of the nuclear triad," in a statement on Monday.
Modernization of the U.S. nuclear force was expected to cost more than $350 billion over the next decade as the United States works to replace its aging systems, including bombs, nuclear bombers, missiles and submarines. Some analysts estimated the cost of modernization at $1 trillion over 30 years.
"Our missiles were built in the 1970s. Things just wear out, and it becomes more expensive to maintain them than to replace them," Wilson said.
(Reporting by Mike Stone; Editing by Tom Brown)