Raytheon, supplier sue each other

Raytheon filed a $100 million lawsuit in Pima County Superior Court against Alliant Techsystems Inc. on July 30, accusing the company of breaching contracts to supply rocket motors for the Advanced Medium-Range Air-to-Air Missile (AMRAAM).

The next day Alliant - commonly known as ATK - filed a federal lawsuit in its home state of Virginia, seeking judgments that Raytheon improperly terminated its motor purchase orders and asking for $30 million in damages.

Problems with rocket motors have delayed deliveries of hundreds of AMRAAMs, prompting the Air Force to halt deliveries and suspend $419 million in payments to Raytheon in February 2012.

In its lawsuit, Raytheon alleges that ATK breached several contracts dating to 2007 by failing to deliver 1,967 rocket motors within specifications and on time, and by delivering at least 442 defective rocket motors.

Raytheon says ATK's actions caused damages totaling more than $100 million, including compensating the Pentagon and allied nations for missed deliveries, as well as lost profits.

In its federal suit, ATK counters that Raytheon improperly terminated its contracts for default. The Arlington, Va.-based company contends the specifications Raytheon set for the motors were "defective" because the solid-propellant motors built to the specs failed cold-firing tests at minus-65 degrees.

ATK also says Raytheon effectively terminated its contracts by instructing ATK to provide motor cases to the new supplier, Norway-based Nammo AS - making it impossible for ATK to fulfill its delivery of full motors.

Raytheon would not comment in detail on the lawsuits.

Raytheon Missile Systems spokesman John Patterson noted that ATK's federal lawsuit was in response to Raytheon's state suit and said ATK's action is "without merit."

ATK would not comment on the matter, spokeswoman Amanda Covington said.

The legal battle is the fallout from years of problems with the AMRAAM, one of the top air-superiority weapons for the U.S. and 35 allied nations.

The 12-foot AMRAAM has been unofficially credited with downing nine enemy aircraft since it was first deployed in 1992, including action enforcing the no-fly zone over Iraq and during the Kosovo War in the 1990s.

The AMRAAM also is one of the biggest programs at Raytheon Missile Systems, Southern Arizona's largest employer with about 10,300 local workers.

The Pentagon is requesting $435 million for the procurement of AMRAAMs in fiscal year 2014, up from $332 million in 2013. One AMRAAM cost about $1.2 million in 2012 not including support costs, according to Pentagon budget documents.

ATK has been supplying the AMRAAM's solid-fuel rocket motors to Raytheon since the early 1990s. The company makes the motors at its Allegany Ballistics Lab in Rocket Center, W.V., according to the court documents.

ATK said that for the first 10 years the company provided AMRAAM rocket motors, the motors passed tests that require sample motors to fire at a temperature of minus-65 degrees. Such so-called "cold-soak" testing is meant to ensure the weapons will work in the subzero temperatures at high altitudes.

But in recent years, ATK said, it has experienced "anamolistic results" from the rocket-motor propellant, causing multiple 50-missile lots of AMRAAMs to fail acceptance tests.

ATK said that under the terms of its contracts with Raytheon, it cannot change the rocket motor specifications, including the specified solid-fuel propellant, without Raytheon's approval. ATK believes the government's specs require the motors to pass tests at only minus-40 degrees.

Raytheon's shipments of AMRAAMs began to slip behind schedule in 2007, and Raytheon in its suit blames ATK for late deliveries of more than 1,000 AMRAAMs.

After Raytheon and Nammo qualified a new motor, payments resumed in December. But Raytheon agreed to compensate the Pentagon and foreign AMRAAM customers between $27 million to $33 million for late rocket motor deliveries, including the value of upgrades, extended warranties and repairs, according to the Air Force.

In 2010, Raytheon and Nammo began development of alternative AMRAAM rocket motors, which were finally qualified by the Pentagon last fall.

ATK also said that Raytheon beginning in January 2012 instructed the company to provide Nammo with more than 1,100 rocket-motor cases, nearly all of which have been delivered, effectively making it impossible for ATK to fill its own contracts for full motors.

The matter came to a head in February 2012, when Raytheon formally notified ATK that it was in default of the motor purchase contracts because of the delayed deliveries and production problems, according to court documents.

In May, ATK notified Raytheon in a letter that it believed its contracts were effectively "terminated for convenience" by Raytheon. Raytheon countered by notifying ATK that the contracts were still in effect and that ATK was in breach of them.

Neither Raytheon nor ATK has filed formal response to each other's lawsuits yet, and no hearings have been set. ATK says it filed its suit in federal court because it involves federal acquisition regulations; interstate lawsuits are often consolidated in federal court.

Contact Assistant Business Editor David Wichner at dwichner@azstarnet.com or 573-4181.