F-35 PEO: Unit Cost Could Drop Below $80 Million by 2020

Lockheed Martin [LMT] and the F-35 Joint Program Office (JPO) remain on track to reach a unit price of $80 million — or less — by lot 14, the program executive officer said Oct. 1.

Coming on the heels of an announcement that the Joint Strike Fighter’s manufacturer and the Pentagon had reached a contract agreement for lot 11 of the aircraft, which included less than $90 million per F-35A, the lowest unit cost yet, Adm. Mat Winter told reporters that there is potential for the cost to dip below $80 million by the time lot 14 is established in fiscal year 2020. (Defense Daily, Sept. 28)

Hill Air Force Base F-35As fly in formation over the Utah Test and Training Range, March 30, 2017. (U.S. Air Force photo/R. Nial Bradshaw)

Hill Air Force Base F-35As fly in formation over the Utah Test and Training Range, March 30, 2017. (U.S. Air Force photo/R. Nial Bradshaw)

Lockheed Martin has committed to reaching the $80 million by lot 14, “and we are holding them to that commitment,” Winter said. That being said, “we have better insight into the true cost of production processes, and as we look at that, we see a potential for a lower than $80 million jet in lot 14,” he added.

The JPO is about to enter negotiations with Lockheed Martin for lots 12 and 13 in the next month, Winter said.

Lockheed Martin remains on track to reach a unit cost of $80 million by 2020, said Michael Friedman, a company spokesman.

“We don’t view affordability as a fixed target – we’re constantly looking for ways to drive cost out of the program so that we’re delivering the best value for our customers,” he said in an emailed statement.

“F-35 unit costs have declined by more than 60 percent since the first production lot, he noted, adding, “We continue to reduce costs across production and sustainment.”

Meanwhile, the JPO has sent its updated acquisition strategy for the F-35 program to the office of the undersecretary of defense for acquisition and sustainment, Ellen Lord, for approval within the next two weeks, Winter said.

The strategy is expected to include the JPO’s roadmap for the aircraft’s Block 4 modernization upgrades, as well as for what has been called “continuous capability development and delivery,” or C2D2, which Winter has described in the past as pushing out continuous software upgrades rather than updating everything in one package at a slower rate. That C2D2 methodology will be implemented as part of the Block 4 upgrades, he noted.

The updated version was written in anticipation of a full-rate production decision next year, Winter said. The Navy and Air Force acquisition executives, Undersecretaries James Geurts and Will Roper, have signed off on the document, he noted.

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