The Pentagon and Lockheed Martin [LMT] have reached a $4.7 billion agreement for the production of 43 F-35 Joint Strike Fighters for the U.S. military and foreign nations, the program office said Friday.

The contract marks the eighth low-rate initial-production batch of the stealth fighter jets and reflects an average 3.5 percent reduction for each aircraft compared to the previous production run, the JSF Joint Program Office said.

F-35A conventional Air Force variant of the Joint Strike Fighter (JSF). Photo: Air Force.
F-35A conventional Air Force variant of the Joint Strike Fighter (JSF). Photo: Air Force.

All three variants are being purchased under the low-rate initial-production contract, including 19 of the Air Force’s F-35A conventional takeoff and landing version at $94.8 million each, six of the Marine Corps’ F-35B short takeoff and vertical landing variant at $102 each, and four of the Navy’s F-35C designed to operate off large deck aircraft carriers for $115.7 million each.

The amounts do not include the engine costs, which are contracted separately with maker Pratt & Whitney, a division of United Technologies [UTX]. Deliveries are to begin in 2016.

On the international side, the contract includes two F-35As for Israel, four F-35As for Japan, plus two for Norway and two for Italy. The United Kingdom will receive four F-35Bs under the contract.

Under the arrangement, Lockheed Martin is required to cover 100 percent of any cost overruns based on the current design. Costs associated with design changes, known as concurrency, and related to system development and demonstration, will be split equally between the contractor and government. If Lockheed Martin brings the cost in below estimate, the defense firm gets to keep 80 percent of the savings.

The F-35 program has been plagued by massive cost overruns, mainly because of redesigns that have had to take place during production, causing the cost of the overall program to nearly double.

The U.S. military plans to buy more than 2,400 of the F-35s with total sales, including internationally, expected to exceed 3,000.