Proposed German missile defense system cost far above estimates

October 18, 2016

Reuters:

A proposal by European missiles maker MBDA to develop and build a new air defense system for Germany came in billions of euros higher than the previous estimate of 4 billion euros ($4.5 billion), according to multiple sources familiar with the proposal.

The German Defence Ministry declined to comment on the report, saying it was still evaluating the proposal submitted late last month by MBDA, jointly owned by Airbus Group, Britain’s BAE Systems PlcĀ and Italy’s Leonardo Finmeccanica SpA.The company also declined to comment.

Germany last year chose the Medium Extended Air Defense System (MEADS), made by MBDA and Lockheed Martin Corp, over Raytheon Co’sĀ Patriot system, but said the companies would have to meet tough performance milestones to retain the contract, one of Germany’s biggest arms projects.

The MEADS system was developed jointly by Germany, Italy and the United States, although the U.S. Army later decided not to buy the system for its own use. Germany is buying MEADS to replace its Patriot air defense system fielded in the 1980s.

German Defence Minister Ursula von der Leyen last month promised to carefully scrutinize the MDBA proposal to avoid the cost overruns and issues that have plagued previous German military procurement programs.

Sources said the MDBA proposal put the cost of finishing development of the MEADS system alone at up to 3 billion euros above the previous estimate of roughly 1 billion euros.

One of the sources said the total cost, including development and procurement, was now seen at 9 to 10 billion euros, more than double the previous estimate of 4 billion euros, raising serious questions about the project’s future.

“With a cost of 9 to 10 billion euros, it’s difficult to know how you can even negotiate,” said the source.

The sources gave no specific reasons for the higher cost….

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