The budget to complete system development of the F-35 Joint Strike Fighter is about $532 million short over the next few years but the funding to complete this work will be found within the program’s existing funding, Air Force Lt. Gen. Christopher Bogdan, program executive officer for the F-35, told a House panel on Thursday.

He said reports that the System Development and Demonstration (SDD) portion of the F-35 Lightening II program will need another $1 billion to be completed are “inaccurate,” adding that “Every penny of that $532 million is coming from inside the F-35 program with funding that I already have.”

Lt. Gen. Christopher Bogdan (USAF), program executive officer, F-35 Lightening II program.
Lt. Gen. Christopher Bogdan (USAF), program executive officer, F-35 Lightening II program.

The sources of the existing funding come from the program’s management reserve, fees from “our industry partners that have not earned and will not earn,” and from savings negotiated in the program’s contracts that are above budget, Bogdan told the House Armed Services Subcommittee on Tactical Air and Land Forces. The program office isn’t asking the warfighters for any more money to complete SDD, he said.

Bogdan described three sources for the current shortfall in development funding. The largest, $267 million, is to fix problems in the program over the past few years such including a fire in one of the aircraft’s Pratt & Whitney engines, and software issues in Blocks 3I and 3F, he said. Pratt & Whitney is a division of United Technologies Corp. [UTX].

Another $165 million of the shortfall stems from requirements that were added to the program since 2013 that were paid for at the time from the management reserve in the program, Bogdan said. These changes include cyber security enhancements for the aircraft and offboard systems such as the mission planning system, and the need for a deployable Autonomic Logistics Information System, he said.

The final $100 million of the shortfall is because in 2014 the Pentagon removed that amount from the research, development, test and evaluation portion of the program to fund higher priorities elsewhere in the Defense Department, Bogdan said. That money was never paid back, he said.

The total cost to complete the SDD work, including the $532 million shortfall, is $2.3 billion, Bogdan said, adding that he is “very confident” he won’t be coming back to ask Congress or the military services “for more money.”

In his prepared remarks, Bogdan said the biggest risks to completing the flight testing schedule within SDD “are software stability, discovery of new software deficiencies, that time it takes to correct deficiencies, and the health of our DT (Developmental Testing) test fleet.”

Bogdan’s prepared testimony included a table for delivery and fielding of the F-35 Block 3F capability, with all but one of the current estimates falling within the February 2018 threshold deadline based on the adjusted program schedule from 2011. The one exception is the envelope to 1.6 Mach for the F-35B short takeoff and vertical landing variant, which he stated has been delayed because only one B-model test aircraft is available that is properly instrumented.

Delivery of F-35B Block 3F 1.6 capability is expected in May 2018.

Lockheed Martin [LMT] is developing and producing three variants of the F-35 for the Air Force, Navy and Marine Corps, and certain allied partners. So far 217 aircraft have been produced.

Earlier this month the F-35 program office awarded Lockheed Martin a nearly $9 billion Lot 10 contract for 90 F-35s. The award marks the first time the F-35A conventional takeoff and landing variant of the aircraft came in at a unit price of under $100 million, $94.6 million to be exact. The unit prices of the multi-role fighters have steadily been decreasing as the Pentagon ramps up production.

Bogdan said the program is on track to reduce the price of the F-35A to between $80 million and $85 million, including the cost of the engine and contractor incentive fees, in FY ’19. That cost reduction will come with a considerable jump in aircraft production but also includes procurement strategies that will save money, he said.

The program has a block buy strategy with its foreign partners and an economic order quantity contracting strategy with its United States military customers that if implemented, will save about $2 billion over lot production buys in fiscal years 2018, 2019 and 2020, Bogdan said.

The potential $80 million unit cost seems to be lower than any previous estimates. Lockheed Martin’s Chief Financial Officer Bruce Tanner said at a recent investor conference that depending on the Pentagon’s buying strategies, the cost of the F-35A could drop to $85 million per fighter in FY ’19.

In 2016 Lockheed Martin was supposed to deliver 53 F-35s but only delivered 46 of the aircraft due to issues with peeling and deterioration inside the fuel tanks. Bogdan said this problem has been fixed for all fielded aircraft. The program will be back on the production schedule this summer, he said.

The Lot 11 contract, which is expected to be awarded later this year, will be for more than $10 billion and include 120 aircraft, Bogdan said.

Initial operational testing of the F-35 has been scheduled to begin this August with 23 production representative F-35s, but Bogdan said he’ll only have 18 aircraft for the testing by February 2018. Bogdan said he has asked the operational testers to consider an incremental approach to the testing, beginning with 18 aircraft and add the remaining production representative F-35s over the next few months.

The program reasons for starting operational testing without the full complement of production ready aircraft include saving money—it costs $30 million for every six-month delay in testing—getting feedback on problems sooner so the fixes can be introduced into the production line more quickly and limit retrofits to fielded F-35s, Bogdan said.

It’s up to the operational testers when to decide the testing, Bogdan said.