Since April, Lockheed Martin [LMT] and the Defense Contract Management Agency (DCMA) have been negotiating a possible repayment by Lockheed Martin of $183 million to $303 million of awarded F-35 funds to the federal government for defects in the nearly two-decade old Autonomic Logistics Information System (ALIS), according to testimony at a nearly three hour July 22 House Oversight and Reform Committee hearing.

In June last year, the DoD Inspector General reported that the Pentagon received non‑Ready-For-Issue (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.”

At the July 22 hearing, Greg Ulmer, the vice president and general manager of the F-35 program, testified in response to a question from Rep. Katie Porter (D-Calif.) that the proposal to reduce the Lockheed Martin repayment to $183 million from $303 million came from the federal 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.

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.

“Will you commit to paying the Defense Department back for every defective electronic log the Defense Contract Management Agency identified?” House Oversight and Reform Committee Chairman Carolyn Maloney (D-N.Y.) asked Ulmer at the July 22 hearing.

“Congresswoman, it’s a complex problem, as we’ve discussed,” Ulmer replied. “It’s not all associated with Lockheed Martin performance. There’s many aspects relative to not Ready for Issue. This electronic file, we are innovating as we go through this process with our customer.”

“This [F-35] has been a concurrent program,” Ulmer said. “We concurrently have developed, produced and sustained this aircraft and the products that we utilize to do that. An electronic equipment logbook contains quite a bit of sophisticated engineering information. It doesn’t simply track a part. It includes technical data, graphical data, ITAR [International Traffic in Arms Regulations] data, a lot of different information. Through the business process, there are elements that…can corrupt this data. It can be presented that way, or a customer can mis-input information. So there are a lot of complexities relative to the electronic EEL book.”

Ulmer said that Lockheed Martin and the F-35 program have made “significant improvement in the last six months” and that the program has reached 83 percent RFI in delivered spare parts.

“I’m fully committed to supporting that continued engagement to resolve those issues going forward,” he said. “I’m also committed to meeting with the Defense Contract Management Agency and the [F-35] JPO [Joint Program Office] to sit down and reconcile the concerns and adjudicate the costs appropriately.”

But Maloney said that she knows many military families “who have lost their father because of faulty equipment, and 85 percent [RFI] isn’t good enough for the U.S. military.”

“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. I hope that you will change your mind and at the next hearing have an update on how you’re now at 100 percent and how you have worked out an understanding of this equipment so that it is working for the military.”

Pentagon Undersecretary of Defense for Acquisition and Sustainment Ellen Lord told lawmakers on the committee on July 22 that a possible resolution other than a Lockheed Martin repayment to the U.S. Treasury may lie in the ongoing DoD negotiations with Lockheed Martin on the F-35 sustainment contract. Those negotiations could result in a lower sustainment contract for Lockheed Martin.

Lord said that the F-35 JPO is developing a new cloud-enabled logistics program, the Operational Data Integrated Network (ODIN), to replace ALIS and that the intellectual property and data components of ODIN will, unlike ALIS, be government-owned, not contractor-owned.

The ODIN standard “should be the standard for any military contract going forward” to prevent theft of national security-related intellectual property–a purloining that has happened from government contractors, Maloney said at the close of the July 22 hearing.

DoD wants to spend $547 million for ODIN in the next five years–funds previously planned for a now defunct effort to restructure ALIS.

ODIN “will be deployed on much more modern hardware” than ALIS, Lord testified on July 22. While ALIS has 891 pounds of hardware, ODIN will have just 50 pounds of hardware, she said, adding that DoD is to move ALIS onto the new hardware this fall as an interim step toward fielding ODIN.

Late last year and early this year, staffers from the House Oversight and Reform Committee visited and interviewed F-35 maintenance personnel at five F-35 bases, and mechanics told the staffers that their bases continue to receive spare parts without ALIS EELs. At Luke AFB, Ariz., the commander said that from June through November last year, 60 percent of the F-35 spare parts received at the base had EEL issues, according to a June 18 letter to Lockheed Martin’s new president and CEO, James Taiclet, from Maloney and Reps. Stephen Lynch (D-Mass.), the chairman of the committee’s national security panel, and Jackie Speier (D-Calif.) and Ro Khanna (D-Calif.).

In addition, incorrect EELs have been a problem for the F-35 program.

“Faulty EELs force maintenance personnel in the Air Force, Navy, and Marine Corps to make difficult decisions,” according to the lawmakers’ letter. “They must choose between reducing readiness by grounding aircraft they believe are unsuitable to fly and ignoring warning alerts that certain parts are missing EELs. GAO [Government Accountability Office] reported that F-35 users said that by continuously ignoring alerts in the Autonomic Logistics Information System (ALIS) caused by missing or inaccurate data, squadrons could be at risk of ignoring an alert for legitimate aircraft issues.”

Air Force Lt. Gen. Fick, the F-35 Program Executive Officer, testified on July 22 that he expects the first F-35 squadron to move off of ALIS by September next year and all F-35 units to transition from ALIS to ODIN by the end of 2022. The move to ODIN may help the F-35 program meet a “25 by 25” goal– reaching a $25,000 per flying hour cost for the F-35 by 2025–an aim established by the program in the last two years. That flying hour cost is about $35,000, Fick testified on July 22.

Reducing the number of EELs required for non-safety critical spare parts may be part of the solution, but the committee said that there has been a disconnect between DoD and Lockheed Martin on such a reduction and that company officials declined to commit to the committee that the company would reduce the number of spare parts with EELs.

“According to staff in the Joint Program Office, DoD is working with Lockheed Martin to reduce the total number of F-35 parts that require EELs by 45%,” according to the June 18 letter. “Reducing the number of parts that require electronic logs would decrease the potential for EELs to go missing or become corrupt. At a briefing with committee staff, Lockheed Martin officials were unwilling to affirm their commitment to reducing the number of F-35 spare parts with EELs.”

Fick testified on July 22 that the F-35 program is considering removing the EEL requirement from a significant number of non-safety critical parts on the plane.

Asked by Rep. Ralph Norman (R-S.C.) whether missing or faulty EELs pose safety concerns for F-35s, Fick replied that “it depends.”

“There are some parts that are safety critical and are life limited, and those parts have EELs, and those EELs must be in place for that part to be installed on an aircraft so in those cases, yes, it is safety critical,” Fick said. “For other parts that also have EELs, those parts are not safety-critical and those parts are not life limited. It’s those parts that we’re looking at to try to find a way to remove the requirement for an EEL…As of right now, we’re looking at eliminating close to 600 of them across the airplane that have EELs but are not safety critical nor life limited parts. So, of the 1,000, [it’s] roughly 600.”