Who's to Blame for Boeing's $40 Billion Missile Failure?

A successful flight test on Dec. 13, 2006. The launch was part of the flight test program for the Ground-Based Midcourse Defense program. Photo credit: Boeing. 

You'd think that $40 billion would get the United States one heck of a missile defense shield. Unfortunately, the Ground-Based Midcourse Defense (GMD) system is still suffering from the same problems I wrote about last year: the inability to intercept targets. But is Boeing (NYSE: BA  ) , the prime contractor on the GMD team, to blame?

Nope, missed that missile, too
According to the Los Angeles Times, so far the United States has spent $40 billion on the GMD system, and for good reason. According to Boeing, the GMD system is the "first and only operationally deployed missile defense program to defend the homeland against long-range ballistic missile attacks." 

In other words, the GMD system is supposed to protect the U.S. from enemy warheads by intercepting them in space. Of course, in order to actually protect the U.S., the interceptors would have to be able to hit an incoming missile. Sadly, of the 16 tests the Missile Defense Agency, or MDA, has conducted, only eight were successfully intercepted. Moreover, the last successful intercept was back in 2008, while the last three tests have failed.  

Hope on the horizon?

Ground-based Midcourse Defense. Photo credit: Boeing.

The above news isn't great for Boeing's reputation. But Boeing isn't the only defense contractor working on the GMD system. Some of the other defense contractors include Raytheon (NYSE: RTN  ) , which makes the kill vehicles, and Northrop Grumman (NYSE: NOC  ) , which is responsible for the BMC2, or battle management command and control subsystem. Still, as the prime contractor on the project, Boeing is responsible for "designing, producing, integrating, testing and sustaining all GMD components."  

The good news is that there will be another test of the GMD's ability later this month, and it'll be the first test since July 2013. Hopefully, there have been significant improvements, and the interceptor will hit its intended target.

Who's to blame?
If the interceptor fails to hit its target, it's likely that there will be plenty of blame to go around. Last time, lawmakers blamed President Obama and his administration's decision to cut funding for GMD testing and maintenance. This time, however, it's likely that Raytheon's kill vehicle will get the blame.

As Reuters reports, for its fiscal 2015 budget, the U.S. Defense Department requested $99.5 million for a new ground-based interceptor kill vehicle, specifically because of Raytheon's kill vehicle test failures. And Frank Kendall, the Pentagon's acquisition chief, said "bad engineering" on the current system necessitates a new kill vehicle. 

What to watch
An operational missile shield that can defend the U.S. against long-range ballistic missile attacks is absolutely essential. In fact, thanks in part to evolving threats from North Korea and Iran, the Obama administration plans to build an additional 14 ground-based interceptors by 2017, and the U.S. Defense Department's fiscal 2015 budget includes $8.5 billion for missile defense programs.  

As such, it's highly unlikely that the GMD system will be scrapped -- in its 2015 budget request, the Pentagon specifically asked for $1 billion for the GMD program. Furthermore, the threats posed by Iran and North Korea don't show any signs of dissipating. Consequently, it's likely that missile defense programs will continue to be a significant source of revenue for defense contractors -- that's good news for Boeing and its partners on the GMD system.

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Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 21, 2014, at 4:43 PM, peterwolf wrote:

    "the GMD system is the "first and only operationally deployed missile defense program to defend the homeland against long-range ballistic missile attacks."

    Hmmm...Well maybe if over the last 30 years the Democrats ,( especially the ones from California who's state is most likely in the cross-hairs of N. Korea or China), hadn't gutted every appropriation request for missile defense , we'd have an operational system now. So, this one is probably too little too late. C'est la guerre !!

  • Report this Comment On June 21, 2014, at 5:10 PM, Stelios22 wrote:

    What is the point, really? Even if they have a 50% success rate, even if we have 200 of them (which we won't) they're not enough to stop a Russian ICBM attack, so we are back to MAD (Mutual Assured Destruction) where we could be without wasting the money. Please nobody say they're because of North Korea...

  • Report this Comment On June 21, 2014, at 5:27 PM, MPA2000 wrote:

    It's always funny to hear idiot warmongers laugh at countries like Iran and NK for their failed missile programs, as if the US has never had any failures.

    Here's yet another example.

  • Report this Comment On June 21, 2014, at 5:50 PM, ilsm50 wrote:

    Might as well have the congress write Northrop and Boeing dividend checks and send them straight out and save the rest of the money wasted on things they cannot build.

    peterwolf, wrong the dims throw as much money at the pentagon's welfare queens as the rethugs.

    Boeing. Lockheed, Northrop, Raytheon etc. have not delivered a working system in the past 65 years. They have been on pentagon welfare, and cannot do a job.

    Shooting down missiles is hard and requires hard decision, spending billions on stuff that is not tested like the missiles in California and Ft Greeley, Alaska is welfare waste for the dividend of companies who would have been bankrupted in 1955 if they were not on pentagon welfare.

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Katie Spence

Katie Spence has been a financial journalist for The Fool since 2011. She specializes in defense companies, “green" technology, autos, and robots. Follow her on Twitter for breaking news in the defense, auto, and robot industry.

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