Exclusive - Pentagon to review Raytheon GPS ground system after cost rise

© Reuters. One of Raytheon's Integrated Defense buildings is seen in San Diego

WASHINGTON (Reuters) - The Pentagon on Thursday said it had ordered a review of Raytheon Co's work on a new ground control system for Global Positioning System satellites after major cost increases in a program initially slated to cost up to $1.5 billion.

Frank Kendall, the Pentagon's chief arms buyer, on Tuesday ordered a "deep dive" in January of the next-generation GPS Operational Control System (OCX) that Raytheon is developing, according to his spokeswoman, Maureen Schumann.

Kendall told an investor conference in New York on Tuesday that most U.S. weapons programs were within 2-3 percent of their cost targets, but he was keeping an eye on one program that was "significantly over." He did not name the program.

Schumann told Reuters on Thursday that Kendall was referring to the Raytheon OCX program, and had signed an acquisition decision memorandum to examine the program further in January.

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 cost increases.

The Air Force earlier this year completed a restructuring of the OCX program that would delay its completion by two years to 2018. Kendall's review will take a closer look at the revised plans for the program.

(Reporting by Andrea Shalal; Editing by Alden Bentley and Chizu Nomiyama)