By Andrea Shalal
BERLIN (Reuters) - Lockheed Martin Corp (N:LMT) and Europe's MBDA will set up a new joint venture to manage a multibillion-euro missile defence programme given German concerns about MBDA's ability to execute the project on its own, sources familiar with the plans said on Thursday.
The companies have been in discussions with the German defence ministry about the plans, and a formal announcement is expected in the coming weeks, said one of the sources, who was not authorised to speak publicly.
The ministry told lawmakers on Tuesday it would not complete a contract with MBDA for the Medium Extended Air Defence System (MEADS) before Sept. 24 elections in Germany, saying more work was needed on "programme management" and the details of the company's bid for the work.
Katrin Suder, state secretary at the ministry, briefed a wider circle of lawmakers about the project, which was initially slated to cost 4 billion euros (3.48 billion pounds), on Wednesday.
The MEADS system was developed by Lockheed and MBDA under a previous joint venture as part of a multinational programme funded by the United States, Germany and Italy, but Washington dropped out of the project several years ago.
MBDA, which is owned by Airbus Group (PA:AIR), Britain's BAE Systems Plc (L:BAES) and Italy's Leonardo Finmeccanica SpA (MI:LDOF), had the lead in developing and submitting the German bid, with Lockheed acting as a subcontractor.
When the contract was received, it was missing some key information, and the projected cost came in billions of euros higher than expected, sources told Reuters in October.
MBDA has been responding to a series of questions to strengthen the proposal since then, but the ministry concluded it would not finish the work in time to negotiate a contract and submit it to parliament for approval before the election.
Now, MBDA and Lockheed are to form essentially a 50-50 joint venture in which MBDA, as the domestic prime contractor, will have an additional vote, the sources said. That will ensure stronger management and shift some of the risk to Lockheed.
Lockheed and MBDA said they were in discussions with the defence ministry about the details of the proposal.
"This is a large and complex programme of great importance. We all agree that a thorough review of the details is appropriate and we continue to receive strong support for our solution and the path we are on to a ... contract," they said.
Suder told lawmakers the ministry was disappointed it wasn't able to complete the contract as planned before parliament's summer recess, but said the ministry remained convinced it had made the right choice when it picked MEADS to replace its existing Patriot system in the summer of 2015.
