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Cost of Raytheon’s GPS Ground Network Rises 56% to $5.3 Billion

  • It’s Pentagon’s ‘No. 1 troubled program,’ an official has said
  • Air Force has only 25% confidence the new estimate will hold

Raytheon Co.’s network of ground stations for the U.S. Air Force’s newest Global Positioning System satellites may cost at least $5.3 billion to develop, according to the service, a 56 percent increase from the original projection.

Even that preliminary Air Force estimate may prove low because the service says it has less than a 25 percent level of confidence in it. The added burden to taxpayers further undermines the reputation of a system that’s running almost five years late and has been called the Pentagon’s “No. 1 troubled program” by the service’s head of space systems acquisition.

Underscoring that message, the Senate Armed Services Committee withheld all $394 million that the Pentagon requested for the system for fiscal 2017 when it approved its version of the annual defense authorization bill last week. The committee said the funds shouldn’t be released until the Defense Department certifies that the ground network is vital to national security and shouldn’t be canceled, a requirement under the so-called Nunn-McCurdy law intended to curb runaway defense programs.

Lockheed Satellites

Raytheon’s network of 20 ground stations and antennas worldwide, called the Operational Control System, or OCX, is needed to take full advantage of new GPS III satellites being built by Lockheed Martin Corp. The satellites also are behind schedule -- the first is 28 months behind its original delivery date and won’t be launched until mid-2017 at the earliest, according to the Air Force.

The Global Positioning System developed by the U.S. military has become ubiquitous, providing turn-by-turn directions on the smartphones of drivers as well as coordinates for bombs hitting Islamic State targets in Syria and Iraq. The new GPS III satellites promise increased accuracy for navigation, a signal compatible with similar European satellites and improved resistance against cyberattacks.

Related story: U.S. Sticks With Raytheon Despite Five-Year GPS Network Delay

Asked to comment on the preliminary cost estimate, Lindsey Borg, a spokesman for Waltham, Massachusetts-based Raytheon, referred to an April 12 press release. It said that the system “successfully passed the first formal qualification test milestone” needed to check out the system and for the early monitoring of satellites in orbit.

That “validates the maturity of the OCX launch and checkout system," Bill Sullivan, Raytheon’s OCX program director, said in the release. “We were able to demonstrate the system’s performance and increase confidence in the program’s path ahead.”

In 2012, the Air Force estimated that developing the ground network would cost $3.4 billion in inflation-adjusted current dollars. In December, Frank Kendall, the Pentagon’s acquisition chief, directed that the development phase be extended two years to July 2021 to solve persistent software problems. The two-year extension is on top of an earlier three-year delay. Kendall rejected an Air Force projection that the network wouldn’t be ready until June 2023.

More Data Sought

In mid-March the Air Force completed the preliminary estimate of $5.29 billion after taking into consideration the latest two-year delay. In a statement, the Air Force emphasized that it wasn’t a final and formal “service cost position.”

The Air Force “needs additional contractor performance data to be collected over the next few months” before “we can establish a service cost position,” Captain AnnMarie Annicelli, an Air Force spokeswoman, said in an e-mail.

The new, tentative estimate doesn’t include a $96 million contract given to Lockheed in February to provide contingency control operations for the first GPS III satellites when they’re launched because the Raytheon system won’t be fully ready.

The Raytheon network’s “costs continue to increase as the program grapples with development difficulties,” Cristina Chaplain, a manager for space programs with the U.S. Government Accountability Office, said in an e-mail. “It is not yet clear that the 24-month extension is a realistic goal given the program’s track record of cost increases and delays. It may be time for the Air Force to revisit its business case assumptions” for the network.

The Air Force hasn’t paid Raytheon any award fees, which are based on good performance, since 2013. Before that, the contractor received $43.9 million of an eligible $92.2 million, according to Air Force figures.

Kendall told reporters last week that he’ll be reviewing Raytheon’s progress in meeting new benchmarks that he set in December. “There are some signs of improvement,” he said.

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