The Defense Department and Lockheed Martin [LMT] are continuing negotiations for Lot 12 of the F-35 Joint Strike Fighter, with plans to award a contract within the next two months, the department’s chief weapons buyer said May 10.
“What we see is Lockheed continuing to work closely with the department to really understand the cost drivers in the production line,” said Undersecretary of Defense for Acquisition and Sustainment Ellen Lord during a Friday media briefing at the Pentagon. “We are getting better and better fidelity around that, which is allowing us to continue to construct incentive fees around the work that’s being done and the critical work to keep the number of aircraft coming off that line consistent with what we need to deliver each year.”
Lord declined to comment on current unit costs under consideration, citing pending negotiations, but said she expects a contract award announcement by June or July.
Her comments come shortly after Defense One reported Lockheed Martin has offered the Defense Department a bid for F-35 Lots 12-14 that would include an $80 million F-35A, which Lockheed Martin has long committed to achieving by 2020.
Mike Friedman, a spokesman for Lockheed Martin, confirmed in a Friday email to Defense Daily that the company is “absolutely confident” that the final agreement will include an F-35A price below $80 for Lot 14 in 2020.
“This represents equal or less than the procurement cost of legacy jets, while providing a generational leap in capability,” Friedman said, noting that Lockheed Martin has reduced the F-35 unit cost by more than 60 percent since the first lot of aircraft was put on contract.
The Lot 11 F-35A unit price was reduced by over 5 percent compared to the previous lot price, Lord said. The Defense Department and Lockheed Martin agreed on the Lot 11 unit price of $89.2 million in September 2018.
“For the first time in the F-35 production program, the Lot 11 contract includes production line performance inventive fees to reduce final assembly span time, while reducing variability and increasing aircraft quality delivered to the warfighter,” Lord said. Ninety-seven percent of Lot 11 aircraft have been delivered on time, she added.
Should the Lot 14 contract include unit cost of less than $80 million, the Pentagon and Lockheed Martin would have reached an over 10 percent reduction in cost from Lot 11, and about 75 percent less than the initial contract.
Lord added that compared to fiscal year 2019, the DoD achieved a 10 percent reduction in the negotiated cost per flying hour in the annual sustainment contract. “This reduction comes at a time when we are projecting to fly 39 percent more hours with a fleet size 26 percent larger than what was scoped in the 2018 contract,” she said.
Last November, the Navy awarded Lockheed Martin a contract modification worth $6 billion to work toward a Lot 12 contract potentially worth up to $22 billion and including 255 aircraft (Defense Daily, Nov.14, 2018). That modification would assist with the production and delivery of 106 F-35 aircraft to the U.S. military, to include 64 F-35A variants for the Air Force, 26 F-35B vertical-takeoff-and-landing platforms for the Marine Corps and 16 F-35C Navy aircraft. It also includes 89 F-35A and B variants for non-DoD partner nations and 60 F-35A aircraft for foreign military sales customers, along with “long-lead parts” for Lot 14 F-35 development.
Lord declined to comment on future negotiations past Lot 14 at the media briefing. However, a February notice on FedBizOpp notes that Lot 15 would tentatively include 116 F-35A Air Force variants, 29 F-35B aircraft for the Marine Corps, and 24 F-35C Navy variants. Lot 16 would include 101 F-35As, 32 F-35Bs, and 24 F-35Cs, while Lot 17 would include 98 F-35As, 37 F-35Bs and 24 F-35Cs (Defense Daily, Feb. 20).
Lockheed Martin has delivered over 400 F-35 aircraft to date, said Vice Adm. Mat Winter, F-35 program executive officer, in his written testimony before a House Armed Services Tactical Air and Land Forces Subcommittee hearing May 2.
Ninety-one aircraft were delivered in 2018, a nearly 40 percent increase over the previous year, he noted. As of April 2019, 29 of the 131 aircraft scheduled for the calendar year have been delivered, and all Lot 10 deliveries are complete. Thirty out of the 141 Lot 11 deliveries are complete, Winter added.