Pentagon eyes alternatives for Raytheon satellite control system

By Andrea Shalal

WASHINGTON (Reuters) - The Pentagon's chief arms buyer on Wednesday said he plans another "deep dive" review on Friday of a troubled Raytheon Co (RTN.N) programme to develop ground controls for a new generation of GPS satellites, and could decide to open part of the programme to a new competition.

Frank Kendall, undersecretary of defence for acquisition, technology and logistics, told an industry conference he is "very worried" about the software-intensive Raytheon programme, which has seen costs rise sharply due to what he called problems with contractor performance and cyber security requirements.

The system is critical to the Air Force's ability to operate GPS, or global positioning system, satellites which help the military target weapons strikes, provide critical timing information and also provide critical services for commercial industry.

After the speech, Kendall told reporters that Raytheon was nearing completion on some of the work, but said the department was looking at various alternatives, including launching a new competition, to complete the bulk of the work on the programme.

Kendall carried out a similar review of Raytheon's next-generation GPS Operational Control System, or OCX, earlier this year after its cost soared to $1.6 billion, up 80.5 percent from an initial contract value, and the programme's completion was delayed by two years to 2018.

The U.S. Air Force's Space and Missile Systems Center awarded Raytheon a contract in February 2010 to develop the hardware and software needed to control U.S. GPS satellites and ensure the security of their signals, but the program has run into technical challenges and seen cost increases.

Kendall said the programme was still experiencing problems but gave no details. The Air Force's former top acquisition official, William LaPlante, told reporters before leaving office that the programme was in "bad" shape, but did not elaborate.

Matt Gilligan, Raytheon's vice president for navigation and environmental solutions, said the programme was now on "a strong foundation" after completion of a number of critical corrective actions implemented since late 2013.

"As a result, this vitally important programme is now well positioned for predictable performance and strong execution going forward," Gilligan said in a statement.

"Raytheon firmly believes that GPS OCX is the best path forward to meet the country's needs for a completely capable and cyber hardened ground control system and the nation's full modernization requirements without compromise."

The OCX system passed the Pentagon's review last February, but Air Force officials said it would be monitored closely to ensure it stuck to cost and schedule targets.

The Pentagon's chief weapons tester warned last January that an operational evaluation of the new ground system would be delayed to early 2019, and said the Air Force would not receive the first control station until after up to eight GPS III satellites were built and launched.

Lockheed Martin Corp's (LMT.N) programme to build the GPS III satellites is back on track after delays involving a sensor built by Exelis Inc, which is now owned by Harris Corp (HRS.N).

(Reporting by Andrea Shalal; Editing by Chizu Nomiyama, Jonathan Oatis and Bernard Orr)