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18 Dec 03. Raytheon Co. (NYSE:RTN – News) is finalizing a $1.04bn contract to upgrade a computer-driven surveillance and data collection radar system onboard the aging U.S. Naval ship Observation Island, the U.S. defense contractor said on Thursday.

The so-called letter contract clears Raytheon to proceed with negotiations on the system, though the company is assured of receiving the deal, said spokesman Steve Brecken.

“We’re under contract — we’re just completing the negotiations, finalizing them,” said Brecken. The final price and terms of the contract will be negotiated within the next 180 days.

Raytheon will replace existing Cobra Judy radar suites, used to monitor ballistic missile tests for treaty compliance, and also determine how best to replace the Observation Island ship. The ship has been in use since 1953.

The Cobra Judy system is designed to detect and track ballistic missile tests, to determine if the tests are within international treaty compliance.

Northrop Grumman Corp. (NYSE:NOC – News) will design and integrate the S-band array antenna for the Cobra Judy mission suite, while Raytheon is responsible for the X-band radar. Together, the radars can detect and monitor ballistic missile testing.

Initial funding for the contract, which was not competitively procured, is $71m, with work expected to be completed by 2011, according to the Navy.

A majority of the work will take place in Baltimore, Maryland, and Sudbury, Massachusetts.

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