A team led by General Dynamics Corp. (GD) has won a contract valued at up to $1 billion to design and develop new portable radios for U.S. troops, a U.S. lawmaker said on Monday.

Rep. J.D. Hayworth, R-Ariz., a Republican, said the U.S. Army was awarding GD and its partners an initial $10 million contract valued at $295.6 million through 2011.

If all options were exercised, the contract had the potential to grow to "over $1 billion and produce hundreds of new jobs" in Arizona, he said in a statement.

Sources familiar with the deal told Reuters that follow-on contracts to build the new software-programmable radios for the U.S. military could swell the overall value of the contract to $5 billion to $10 billion in the longer-term.

U.S. Army officials in Washington gave no details, but said they briefed lawmakers on the contract on Friday and planned a news release later on Monday.

The Cluster 5 version of the Joint Tactical Radio System (search) (JTRS) family of radios can be programed with software and uses satellite technology to provide voice, data, images and video communications to U.S. troops.

The GD-led team, which included Rockwell Collins Inc. (COL), Thales SA and BAE Systems Plc, won out over an ITT Industries Inc. (ITT) team that included Raytheon Co. (RTN), Boeing Co. (BA) and Harris Corp. (HRS), the sources said.

Officials at Falls Church, Va.-based GD and Rockwell had no immediate comment.

The team will now work to develop new hand-held radios, portable radios to fit in backpacks and small form-fit radios as part of the JTRS program, which will eventually replace more than 25 types of military radios now in use.

Loren Thompson, director of the Virginia-based Lexington Institute, said the contract was good news for GD, which also stood to gain from an expected increase in orders for its Stryker armored vehicles.

GD shares were up 18 cents, or 0.19 percent, in afternoon trading on the New York Stock Exchange. Rockwell shares were down 28 cents, or 0.82 percent.