SGGKY Singapore Tech Engineering Ltd (PK)

By Doug Cameron 

Science Applications International Corp. and a unit of BAE Systems PLC will compete to design a new amphibious truck for the Marine Corps, a highly prized contract that analysts estimate could ultimately be worth around $1.5 billion.

The Pentagon on Tuesday said the Marines awarded the two companies deals to build prototypes for the long-planned Amphibious Combat Vehicle, which is designed to ferry troops ashore and into battle. One of the companies will be chosen in 2018 to build more than 200 troop carriers to replace Vietnam-era equipment.

The companies beat three rivals in what is expected to be the final big-ticket U.S. defense award of 2015, with Lockheed Martin Corp. failing for the third time this year to break into a new market.

The five-way development contest had been viewed by analysts as wide open, with General Dynamics Corp. and Advanced Defense Vehicle Systems Corp. also fielding entrants.

The decision marks the latest stage in a quest lasting more than 25 years that has included the cancellation of previous projects because of cost and technical problems, and the redesign of what was meant to be a land-only armored carrier for seaborne use to make it more affordable and suited to the Marines' requirements.

The U.K.'s BAE is a longtime supplier of military vehicles while SAIC, in McLean, Va., is better known as a provider of services rather than weapons, though it has deals to support the existing amphibious carriers.

Both partnered with overseas defense companies to offer modified versions of existing vehicles. SAIC proposed a version of the Terrex carrier developed by Singapore Technologies Engineering Ltd. BAE teamed with Italy's Iveco, a unit of CNH Industrial NV.

SAIC and the BAE unit will each build 16 eight-wheeled vehicles for testing, subject to available funding, with the winner expected to deliver the 204 production carriers to the Marines by 2020 at an average cost of $6.5 million apiece. A potential follow-on deal would involve 490 more armored vehicles, though the specifications are likely to be changed by that time.

For Lockheed, the latest loss follows its defeat by Oshkosh Corp. in the pursuit of a $6.75 billion contract to build almost 17,000 new trucks to replace aging Humvees for the Army and Marines, as well as its drubbing by Northrop Grumman Corp. in a larger deal to develop a new long-range bomber. Lockheed has protested both decisions.

Write to Doug Cameron at doug.cameron@wsj.com

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(END) Dow Jones Newswires

November 25, 2015 00:02 ET (05:02 GMT)

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