December 23, 2015 / 1:20 AM / 2 years ago

Pentagon vows tough scrutiny of Raytheon GPS control system

WASHINGTON (Reuters) - The Pentagon’s chief arms buyer on Tuesday vowed “very intense management” of Raytheon Co’s work on a ground control network for new global positioning system (GPS) satellites, and said the department would revisit other options if Raytheon’s performance did not improve.

The Raytheon global headquarters in Waltham, Massachusetts is seen in this undated handout photo. REUTERS/Raytheon Company

Defense Undersecretary Frank Kendall told Reuters he believed a new plan that delays completion of the ground system by two years would ultimately succeed, but said the U.S. Defense Department - and he personally - would remain vigilant.

Kendall approved the revamped schedule after a Dec. 4 review of the troubled program, whose projected cost has more than doubled to $3.6 billion, including inflation. Kendall said officials were still calculating the new projected cost of the program.

“We looked very hard and we considered all possible options. The consensus in the room after we had done so was that we needed to continue” with Raytheon, Kendall said in an interview. “But we’re going to do it with very intense management.”

Halting the program and starting over would have added billions of dollars in costs and delayed completion by at least three years, Kendall said.

Kendall said he would meet personally with Raytheon’s chief executive, Tom Kennedy, once a quarter to review progress, and said he has engaged internal and external experts to keep independent tabs on the program.

“It’s going to get as intense a management as I can bring to it and I’m expecting to see an improvement in performance,” he said. “If we don’t, then we can consider some of those options again.”

Kendall said he opted for the two-year delay instead of the 47-month delay initially proposed by the Air Force because Kennedy had assured him it was doable, and also because he did not want to “give the program that kind of latitude.”

The Air Force’s initial proposal included a year of “pure buffer ... and another year of presumed problems,” he said.

Kendall said Raytheon’s problems on the program had gone on for years and the program “has not been executed very well.”

He said he and Kennedy would meet early next year to discuss the revised cost estimate and possible changes in the incentive fee structure in the existing cost-plus contract. He said it was not yet clear when the department would assess whether to continue with Raytheon or choose another contractor.

Kendall had no immediate details on how much Raytheon’s incentive fee had been docked due to poor performance. He said the issue could affect Raytheon’s ratings in future weapons competitions, which assess “past performance.”

Reporting by Andrea Shalal; Editing by Andrew Hay and Leslie Adler

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