May 21 (Bloomberg) -- Warheads produced by Raytheon Co. for the U.S. missile defense system were delivered as many as 50 days behind schedule last year because of poor management, the head of the Missile Defense Agency said.

A “lack of discipline during assembly and testing” of the warheads was responsible for the delays, Army Lieutenant General Patrick O’Reilly told a House panel today.

The Raytheon warhead is the critical weapon in the $35.5 billion U.S. network of ground-based interceptor missiles linked by satellites, radar and communications. The 28 missiles are in silos at Fort Greely, Alaska, and Vandenberg Air Force Base, California, as a defense against North Korean missiles.

Raytheon is the world’s largest missile maker. The warheads are assembled at its plant in Tucson, Arizona, and the lapses there are similar to the “many other” problems over the past year with other missile defense contractors, said O’Reilly, the agency’s new commander.

Because the military monitors Raytheon’s production and scrupulously inspects the finished product, the quality of the warheads that are deployed isn’t in question, agency spokesman Rick Lehner said.

Cost Overruns

What is at issue, according to O’Reilly, is the cost overruns the government pays and the delays in testing the system that are caused by the slowness in producing and delivering the warheads, satellites and other components.

“I remained concerned with lapses” in management at “several industry partners,” O’Reilly told the House Armed Services Committee panel that oversees missile defense. “That has impacted system cost, schedule and performance.”

The cost overruns on the $37 billion worth of system contracts awarded between 1996 and 2009 so far total about $2.1 billion, or 6 percent, O’Reilly said.

Paul Francis, U.S. Government Accountability Office director for weapons review, said in an e-mail, “Quality problems with both interceptors and targets produced by several contractors have contributed to reductions and delays in flight tests.

Only two of the seven flight tests planned for 2007 and 2008 were conducted, said Francis, who oversees the agency’s annual missile defense assessment.

Prime Contractor

Chicago-based Boeing Co. is the prime contractor on the system. Northrop Grumman Corp., Orbital Sciences Corp. and Raytheon are the top subcontractors. Raytheon has made the warhead for the interceptor missiles since 1999.

The Pentagon’s independent Defense Contract Management Agency has inspectors in key defense plants nationwide. O’Reilly said the problems with the warheads’ assembly prompted him to ask the agency to make a separate, more intense assessment of Raytheon’s production procedures.

The contract management agency between March 1, 2008, and March 20 of this year sent Raytheon Missile Systems 33 complaints for violating agreed-upon procedures for assembling, packaging and testing the warhead and its components.

The agency said this month that 31 of the 33 complaints lodged with Raytheon have been resolved.

John Patterson, spokesman for Raytheon Missile Systems in Tucson, said the company “has responded” to all the Pentagon’s citations. “Raytheon’s quality systems enable us to quickly identify, disclose and resolve issues,” he said.

O’Reilly today said he was “working closely” with the contract management agency to hold contractors “accountable.”

He didn’t say whether Raytheon has been penalized in any way, such as cutting its bonus, withholding payments or refusing to accept delivery of products, which prevents payments.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net.

Last Updated: May 21, 2009 17:50 EDT