Lockheed Receives Initial Order for Next Production Lot of F-35

by: Matthew Potter
August 10, 2011

Category: Business Line, Companies, Congress, Contract Additions, Contract Awards, Department of Defense, Events, Federal Budget Process, Lockheed Martin, Military Aviation, production program, Services, U.S. Air Force, U.S. Marine Corps, U.S. Navy | RSS 2.0

Despite the cost concerns hanging over the program the U.S. Defense Department continues its investment in Lockheed Martin’s (LMT) F-35 JSF program by placing a contract for the advanced procurement items for the sixth production lot. This $535 million order will support a buy of 38 aircraft.

This production buy is the largest to date and also includes the first aircraft for Australia and Italy. The one previous had the first international aircraft for the United Kingdom and the Netherlands.

The Government and Lockheed are currently negotiating how to pay cost overruns on the first three production lots of the aircraft. Lot 4 is being produced under a contract that includes cost sharing between the two parties. The military has gone to Congress with a request to reprogram over $200 million to help pay for the increases on the first lots. Congress has yet to approve this reprogramming and in fact the Senate has sent several questions about the program including estimated costs to terminate the program. Senator John McCain (R-AZ) has already tried to amend the FY12 Defense Authorization Act with language that would require cancelling the program if cost goals are not met over the next two years.

DoD though has said that without the reprogramming it might have to reduce this next planned buy to find money to cover them and pay Lockheed what they are owed. Most likely if any aircraft are cut they would be from the U.S. order as the foreign buyers need reassurance that they will receive their aircraft on the current schedule. Australia is already talking about a potential “gap” in capability due to previous delays in the JSF program which would require investment in a different aircraft to cover it.

The JSF has suffered from a history of schedule and cost increases driven by testing and just the overall complexity of the system and the program. It seemed that in recent months the program had been on schedule although costs had increased requiring funding changes such as the reprogramming mentioned earlier. If the aircraft delivery and Initial Operational Capability (IOC) dates continue to move to the right it could cause further questioning of the commitment to the program by not only the foreign partners but the U.S. itself.

If the F-35 was to be cancelled then either a new program would have to be started or the U.S. would be faced with buying upgraded F/A-18 or an aircraft from Europe such as the Eurofighter Typhoon to provide the necessary capability. This is not a plan that the Pentagon would like to consider.

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