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Lockheed delivered fraction of missile defense interceptors

By Andrea Shalal

WASHINGTON (Reuters) - Lockheed Martin Corp delivered only three of 44 interceptors for the THAAD missile defense system in fiscal year 2015 due to a seven-month halt in production caused by computer issues, the U.S. Missile Defense Agency said.

The interceptors for the Terminal High Altitude Area Defense program, which has an average budget of $800 million a year, are now expected to be delivered by September 2016, Rick Lehner, spokesman for the agency, said in an email to Reuters.

Such glitches typically result in lower award or incentive fees for contractors, but Lehner had no immediate comment on whether Lockheed's fees would be reduced.

Lockheed, the Pentagon's No. 1 supplier, declined to comment on the financial impact of the delayed deliveries.

THAAD provides the U.S. military a land-based, mobile capability to defend against short- and medium-range ballistic missiles, intercepting incoming missiles inside and outside the earth's atmosphere. Each launcher uses eight interceptors.

Lockheed spokeswoman Cheryl Amerine said the computer issue had been resolved and the revised delivery plan was met in June.

"Interceptor deliveries were delayed to allow time for a requested upgrade that further improved the mission computer and interceptor’s performance," she said.The program halted production of interceptors during missile segment testing after the mission computer's Static Random Access Memory - a new device on the computer's memory card - failed an acceptance procedure, Army Colonel Anthony Brown, THAAD program manager, said in a report released last week.

As of March, when that report was completed, the program had projected that Lockheed would deliver nine interceptors in the 2015 fiscal year that ended Sept. 30. But Lehner said only three were actually delivered.

Brown said budget cuts also posed problems for the program, with funding for THAAD interceptors cut from 72 a year in fiscal 2011 to around 18 a year in fiscal 2017 and 2018, and 17 a year in 2019 and 2020.

As a result, the U.S. Army was unlikely to achieve its goal of receiving a full combat load of interceptors for a seventh unit and a preliminary load for an eighth unit by fiscal 2020, unless costs could be lowered by bundling orders, Brown said.

His report was part of the Pentagon's third annual report on the performance of its weapons acquisition system.