WASHINGTON — Functional testing of the U.S. Navy’s second-generation Aegis Ballistic Missile Defense (BMD) system, due to become operational in 2012, was completed in June, Lockheed Martin officials said Aug. 25.

Bethesda, Md.-based Lockheed Martin, meanwhile, is set to begin adapting the ship-based Aegis BMD system for use on land as part of the United States’ planned European missile shield under a nearly $70 million sole-source contract the Defense Department announced the same day.

The Aegis BMD system is designed to counter short- and medium-range ballistic missiles and is currently deployed on 21 U.S. Navy ships. The system relies on the Lockheed Martin-developed Aegis weapon system, Standard Missile-3 interceptors and missile tracking radars. The Aegis BMD system has intercepted 20 of 24 targets in testing and operational missions, including the February 2008 shoot-down of a defunct U.S. spy satellite.

The current Aegis BMD configuration, known as version 3.6.1., was certified for operations by the Navy in March 2009, adding the capability for ships to defend themselves from short-range ballistic missiles in the terminal phase of flight. The Navy, Missile Defense Agency (MDA) and Lockheed Martin are now working on several increasingly capable versions of the system.

The Aegis BMD version 4.0.1 is the next upgrade to the system, which will be bundled into a new signal processing computer that will be integrated alongside ships’ existing computers. The 4.0.1 system will provide an enlarged coverage umbrella and enable enhanced target discrimination, according the MDA’s website.

A prototype of the 4.0.1 system was installed on the USS Lake Erie in June 2009. The government-industry team in June 2010 completed a two-week demonstration of the 4.0.1 system that showed it meets all requirements, Nick Bucci, Lockheed Martin’s Aegis BMD director, said during a media briefing here. The system will continue to progress through testing before being certified by the Navy for operations near the end of 2011, Bucci said.

At the same time, Lockheed Martin is working on an Aegis BMD version 5.0, which will be the system’s first major hardware refresh. At the heart of the 5.0 system is Lockheed Martin’s new Multi-Mission Signal Processor that will be installed on Navy destroyers starting in 2012. The processor detected and tracked four live targets in early testing during a recent missile defense exercise, according to an Aug. 25 Lockheed Martin press release.

The Pentagon now plans to have a total of 38 Navy ships with the Aegis BMD capability available by 2015, the MDA has said. At one time the plan was to upgrade each of the ships to the 4.0.1 capability before moving to the 5.0 capability, but the military currently plans for some ships to go directly from version 3.6.1 to version 5.0, Bucci said.

Japan is the only other nation to deploy the Aegis BMD system, and that nation recently completed its installation on a fourth and final ship. The Japanese destroyer Kirishima will conduct its first flight test in October, Bucci said.

Meanwhile, Lockheed Martin has started work under an eight-month Missile Defense Agency contract for the Aegis Ashore program that is part of the new strategy for European missile defense announced by U.S. President Barack Obama last year. The revised approach includes sending Aegis BMD ships to European waters as soon as late 2011 and deploying a land-based version of the system in Europe by 2015.

Under an initial contract worth as much as $69.8 million, Lockheed Martin will facilitate a systems requirement review in September and a system design review in January, the Defense Department press release said.