Pentagon officials expressed tempered optimism to lawmakers Wednesday that the F-35 Joint Strike Fighter program will meet key milestones, while stressing the importance of an upcoming assessment of Block 3 software.

Pentagon acquisition chief Frank Kendall told the Senate Appropriations Defense subcommittee (SAC-D) that aircraft development is almost complete, contract costs have dropped, and there’s “no question” that because of current threats the United States needs such a fifth-generation jet fighter. Still, he acknowledged there is “a lot of work remaining.”

The Pentagon plans to buy 2,443 F-35s for the Air Force, Navy, and Marine Corps from Lockheed Martin [LMT]. It is now pegged to cost $391 billion, up roughly 70 percent over a decade.

After hours of testimony from two panels of experts, Sen. Richard Durbin (D-Ill.)–the relatively new chairman of the SAC-D– gave a similar assessment as Kendall’s. The senior senator said he is “not happy with the way we reached this point” of the F-35 effort, but he’s “going to play with the hand that’s been dealt.”

“At this point we’re seeing some positive reductions in cost, and we’re near completion,” Durbin told Defense Daily. “And it does offer fifth-generation capability, which we absolutely have to have as a nation.”

Kendall said he is “cautiously optimistic” the F-35 effort will be able to significantly increase production in 2015. He will review the program this fall to determine if the production can ramp up as planned, an economical move he maintained is needed to meet cost targets with the program. He scaled back production in 2012 because of concerns with the level of concurrent testing and production, as well as the stability of the design. The 2015 ramp up could be impeded, though, if development and testing don’t continue on track or if costs tied to concurrency don’t continue to decline, he said.

Kendall noted F-35 flight testing is nearly 40 percent complete and aircraft development is nearly done. The cost of producing the aircraft has been coming down, dropping 4 percent from the Lot 4 to Lot 5, following contractual changes. The Pentagon currently is negotiating contracts for production Lots 6 and 7 with Lockheed Martin and engine maker Pratt & Whitney [UTX]. And, meanwhile, while Kendall maintained the Pentagon has a “solid understanding” of production costs, it is now working on ways to lower sustainment costs, through steps including increased competition.

Kendall acknowledged a significant amount of development work remains with the F-35 program, in particular with the future Block 3F systems software.

F-35 Program Executive Officer Air Force Lt. Gen. Christopher Bogdan told the SAC-D he is “confident” the program will meet its schedule for Block 2B and 3I software, which are pegged to debut in 2015 and 2016. That schedule will allow the Marine Corps to reach initial-operational capability (IOC) with the Block 2 software in 2015. Yet Bogdan said he is “less certain” about the Block 3F software being ready in 2017. The F-35 program office is conducting a critical design review for Block 3 early this summer that will help the Pentagon gauge if its plans for the Block 3F software are on track. The Navy is waiting to reach IOC with the F-35 with the Block 3F software.

The Pentagon requested $6.5 billion in FY ’14 for buying 29 F-35s, along with $1.8 billion in development funding for the program.

The SAC-D has not yet approved its fiscal year 2014 defense appropriations bill. Yet the version of that legislation approved by the House Appropriations Committee, as well as the defense authorization bills approved by the full House and Senate Armed Services Committee, all approve the FY ’14 request for buying 29 F-35s.