By Andrea Shalal-Esa

WASHINGTON (Reuters) - The Pentagon will soon choose either Boeing Co or Lockheed Martin Corp to design a next-generation radio system for aircraft, ships and ground stations, a deal potentially worth billions of dollars to the winning bidder.

Award of the Joint Tactical Radio System contract could come as soon as the end of February, according to Leo Conboy, program manager for Boeing's team. The Pentagon has promised a decision by the end of the first quarter.

Defense analysts say the contract for system design and development of the Airborne Maritime and Fixed Station (AMF) segment of the program will total $800 million to $1.2 billion. A later production contract could translate into business deals valued at $10 billion or more over the long term, they say.

The tactical radio system is a family of advanced software-based communications that will replace current radio equipment throughout the U.S. military. It will provide secure Internet-like capabilities and networking for voice, text, audio, and video.

The ambitious multi-billion dollar program ran into problems several years ago, prompting the Pentagon to appoint Dennis Bauman in 2005 to lead a restructuring effort.

Bauman said the program was back on track, delivering the first radios to troops and testing others. The AMF contract is the final piece of JTRS, which includes development of the underlying software, and of handheld and backpack-sized radios.

Boeing and Lockheed were each awarded an $81 million contract in December 2004 for preliminary design work on the radio system, which will be integrated into more than 150 airborne, shipboard and fixed stations.

In an interview, Conboy acknowledged past problems with the radio system, including a Boeing-led effort to develop the underlying software.

But Boeing made "significant" progress over the past two years, which in turn helped to reduce the risk of the AMF segment that will now be awarded, Conboy said.

"I feel very bullish about the probability of achieving the goals of the program," he said, adding Boeing's work on the other program had helped weed out which technologies to use and which to skip. Boeing's team includes Harris Corp , L-3 Communications Holdings Inc , and Rockwell Collins Inc.

Rival Lockheed is competing for the contract with a team that includes BAE Systems Plc , General Dynamics Corp , Raytheon Co and the Northrop Grumman Corp unit that works on communications equipment for F-22 and F-35 fighter jets.

Glenn Kurowski, director of the Lockheed team, lauded his group's collective experience on communications equipment, and said past performance accounted for about one-third of the evaluation criteria.

Lockheed is well-positioned to win the award, due to its experience on WIN-T, another big communications program; its work on the precursor contract to this one; and its experience as a systems integrator on other weapons, he said.

"It's not just a radio; it's about the integration," Kurowski told Reuters.

Initially, the AMF equipment is due to be installed on Army Apache and CH-47 helicopters, Navy E-2C reconnaissance planes, C-130 aircraft used by special operations forces, Navy aircraft carriers and other warships, plus unmanned fixed radio sites.

The Pentagon's fiscal 2009 budget request includes $203.8 million for the AMF program, up from $106.7 million in fiscal 2008. Funding is expected to rise steadily as the program nears low-rate initial production in 2012.

(Reporting by Andrea Shalal-Esa, editing by Gerald E. McCormick)
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