Raytheon (NYSE:RTN) landed another big contract win from the Pentagon Monday.
The Department of Defense awarded its Missile Systems division a modification to a pre-existing contract to perform "post-preliminary design review work" on the Standard Missile-3 missile system. This contract, which covers work through the software release date (and is expected to wrap up by Sept. 30, 2015), adds $28.3 million to Raytheon's funding on the project, and lifts the total value of Raytheon's SM-3 contract to $689.1 million.
The total value could go even higher than that, however. The underlying contract, modified by Monday's award, was clocked at a ceiling value of $809 million back in March 2012. This suggests that Raytheon could eventually collect a further $120 million for its work on the SM-3.
SM-3 is being incorporated into the U.S. Missile Defense Agency's Aegis Ashore Missile Defense System (AAMDS), a Lockheed Martin (NYSE:LMT) project designed to convert the Aegis air defense system into a true defense against intercontinental ballistic missiles. Lockheed's most recent contract on the system, like Raytheon's, has an expected completion date in 2015. However, the AAMDS system as a whole is not expected to be complete before 2021 -- suggesting that even the $809 million cost estimate may prove conservative.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin and Raytheon Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.