The $75 Million Star Wars Refund

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WASHINGTON: It sounds like the greatest deal in the history of good deals: If our product doesn't work, we'll pay you $75 million. But when the product is a Star Wars-style missile defense system and the customer is the U.S. Army, that's a different story. Missile manufacturer Lockheed Martin is supposed to be developing a $15 billion defense network known as THAAD (Theater High Altitude Area Defense) capable of shielding U.S. troops from enemy rocket attack; the Army wanted it by 2006. But so far Lockheed's score is 0 for 5 tests -- and with each test costing $12 million, even the Pentagon is sitting up and taking notice.

"That's not the kind of results you can take to your boss and ask for more money," says TIME's Pentagon correspondent Mark Thompson. "It wasn't even hi-tech failures, but rudimentary stuff -- welding, guidance systems, booster rockets. You want failures you can learn from."

Thus did Lockheed offer to pay $15 million per missile if three out of their next five tests, starting in November or December, end ignominiously. A spokesman said the five failures had forced Lockheed to "apply additional resources in the area of quality." And this is a firm with plenty of resources to play with. As Thompson out, "$75 million isn't a lot of money to Lockheed" -- especially not with the approximately $3.2 billion the company has already received for THAAD from the government. No prizes for guessing who gets stuck with the bill at the end of the day: Step forward, John Q. Taxpayer.