Boeing Co. will design and manufacture communications satellites for NASA under a new $695 million contract that could be worth up to $1.2 billion if all the options are exercised. The company will also upgrade NASA’s ground satellite facilities as part of the contract.

Boeing will develop the next generation of the Tracking and Data Relay Satellites, which are part of the line of satellites the company has worked on previously. The contract calls for two satellites and increases Boeing’s satellite backlog to 27. The first new satellites, the TDRS-K, are scheduled to be launched in 2012.

“Three Boeing-built TDRS satellites are currently providing critical services to NASA and the nation's space program,” said Howard Chambers, vice president and general manager at Boeing Space and Intelligence Systems. “Space-based communications assets are critical to the infrastructure of manned spaceflight systems, and TDRS plays an important role.”

Boeing’s partner General Dynamics Corp. will update and modify the existing TDRS system ground terminals, located near Las Cruces, N.M. The ground terminals, known as the White Sands Complex, are the primary two-way communications link between the TDRS satellites and the ground-based elements of the TDRS system communications network.

Boeing of Chicago ranks No. 2 on Washington Technology’s 2007 Top 100 list of the largest federal government prime contractors, and General Dynamics of Falls Church, Va., ranks No. 7.