Agreement with Lockheed Martin on Fixing F-35 Spare Parts Problems ‘Step in Right Direction,’ Democrats Say

The Sept. 18 handshake agreement between the Defense Contract Management Agency (DCMA) and Lockheed Martin [LMT] on nearly $70.6 million in expected company investments to fix faulty electronic equipment logbooks (EELs) for the F-35 Lightning II is “a step in the right direction,” but further action is required to hold the company accountable, according to two top Democrats on the House Committee on Oversight and Reform.

“We applaud the Department of Defense for its efforts to hold Lockheed Martin accountable for failing to meet its F-35 contract requirements,” according to a Sept. 30 statement from Committee Chairwoman Carlolyn Maloney (D-N.Y.) and Rep. Stephen Lynch (D-Mass.), the chairman of the committee’s national security panel. “While we believe Lockheed should have reimbursed American taxpayers for a greater share of the funds DoD spent to address the inefficiencies uncovered by our Committee’s investigation, this is a step in the right direction.  We look forward to seeing the final signed agreement that codifies Lockheed Martin’s commitment to improving the F-35 program.”

After DCMA confirmed the settlement on Sept. 29, DoD public affairs took control of further responses to questions on details of the agreement and had not approved such answers by press time on Sept. 30.

Since April, Lockheed Martin and DCMA had been negotiating a possible repayment by Lockheed Martin of $183 million to $303 million of awarded F-35 funds to the federal government for EEL defects in the Autonomic Logistics Information System (ALIS) (Defense Daily, July 22).

Brett Ashworth, a spokesman for Lockheed Martin, wrote in a Sept. 30 email that the handshake agreement “calls for Lockheed Martin to compensate the government with Lockheed Martin investments toward improving EELs’ compliance and accuracy.”

The F-35 Joint Program Office (JPO) and Lockheed Martin have begun a transition to the Operational Data Integrated Network (ODIN) cloud-based logistics program from the nearly 20 year-old ALIS (Defense Daily, Sept. 16).

“After spending decades to develop ALIS, DOD again is contracting with Lockheed Martin to build an IT system that provides the functionality and reliability Lockheed Martin has failed to deliver over the last two decades,” Maloney said on Sept. 30. “DoD must address the shortcomings of ALIS, ensure they do not carry over to the new system, and be better positioned to hold Lockheed Martin accountable going forward.”

Since 2014, the Government Accountability Office (GAO) has called on DoD to establish a performance management process for the F-35’s ALIS, but to no avail (Defense Daily, March 16).

“DOD needs to establish a performance-measurement process for the F-35 information technology system, develop an intellectual property strategy, and prepare an accurate and reliable cost estimate,” Maloney said on Sept. 30. “If immediate action is not taken more taxpayer money will be wasted and the problems will be compounded as the fleet grows.”

A day before the Sept. 18 handshake agreement between DCMA and Lockheed Martin, DCMA said that the agency and Lockheed Martin were “still negotiating the consideration with respect to the Electronic Equipment Log issues on Ready-for-Issue (RFI) parts” and that an agreement was expected by the end of September.

At a committee hearing in July, DoD acquisition chief Ellen Lord said that one settlement option was to reduce future contract payments to Lockheed Martin for the F-35. DCMA apparently decided not to go that route.

In June last year, the DoD Inspector General reported that the Pentagon received non‑RFI spare parts for the F-35 and “spent up to $303 million in DoD labor costs since 2015, and it will continue to pay up to $55 million annually for non‑RFI spare parts until the non‑RFI spare parts issue is resolved.”

Greg Ulmer, Lockheed Martin’s F-35 general manager, said at the July committee hearing that the proposal to reduce the reimbursement from $303 million to $183 million had come from the government.

At times, F-35 bases have not received spare parts with electronic equipment logs (EELs) that help gauge part health, or F-35 bases have received faulty EELs, but Ulmer told the committee in July that Lockheed Martin has largely resolved the problem, as the program had reached 83 percent RFI in delivered spare parts.

Maloney said that that percentage was not sufficient. “It’s got to be 100 percent, and a contract is a contract,” she told Ulmer. “Our military managers don’t want to be sending people up in the air when they don’t have everything perfectly there that is in that contract. That’s only fair.”

Ulmer said at the July hearing that the defective EELs are “not all associated with Lockheed Martin performance” and that an EEL does not simply track a part, but “contains quite a bit of sophisticated engineering information,” including technical data, graphical data, and ITAR (International Traffic in Arms Regulations) data, that can result in EEL errors.

Lockheed Martin received sustainment contracts for the F-35 of $388 million in 2015; nearly $647 million in 2016; $1.1 billion in 2017; $1.4 billion in 2018; $1.1 billion in 2019; and $1.9 billion this year.

The company has asked DoD to allow five-year sustainment contracts, versus the yearly such contracts, to save costs.

About 1,000 parts of the 50,000 parts on the F-35 require an EEL that designates a given part as RFI and able to be installed on the F-35. The EEL includes part history and remaining part service life in hours. Under the sustainment contracts, Lockheed Martin is required to deliver RFI F‑35 spare parts, such as wheel, seat, and window assemblies.

If a spare part lacks an EEL, maintainers are to submit an Action Request (AR) for Lockheed Martin to fix the EEL problem, which may also result from incorrect part information entered into ALIS. DoD personnel may also create EEL problems when they do not follow proper spare part maintenance procedures when removing or installing a spare part or when transferring a spare part between units, according to the DoD Inspector General.

“According to the DCMA, DoD personnel have submitted over 15,000 ARs from December 2015 to June 2018 to correct the non‑RFI problems,” according to the DoD Inspector General report. “Lockheed Martin charged the DoD for each AR submitted for non‑RFI spare parts. The cost reimbursement sustainment contracts included a clause, which stated that the cost of replacement or correction is an allowable cost.”

Air Force Lt. Gen. Eric Fick, the former F-35 program executive officer, told lawmakers in July that the program, in one effort to address the ALIS issues, is thinking about removing the EEL requirement for about 600 spare parts that are not safety critical nor life limited.

The F-35 program has also undertaken software updates for ALIS, and Lord has said that the program has seen RFI rates increase from 43 percent in February to 83 percent in June for F-35s at Hill AFB, Utah; Luke AFB, Ariz.; and Marine Corps Air Station Yuma, Ariz.

Ulmer said that the F-35 program has been able to port the ALIS software “onto the new ODIN hardware structure”–a fix that has gone through initial flight test at Naval Air Station Patuxent River.

While ALIS has 891 pounds of hardware, ODIN will have just 50 pounds of hardware.

Ulmer said that the F-35 program is seeking an initial operational capability for ODIN in the fall of next year, followed by full operational capability a year later.