Lockheed Martin [LMT] is to receive incentive bonuses on its sustainment contract for the F-35 fighter by achieving an “up to” 75 percent mission capable (MC) rate for the U.S. Air Force F-35A and a 61 percent MC rate by fiscal 2023 for the U.S. Marine Corps F-35B and U.S. Navy F-35C, the F-35 Joint Program Office said on March 9.

The conference report on the fiscal 2022 omnibus spending bill directs the DoD acquisition chief’s office to deliver to the congressional defense committees a report on DoD’s “payment of fees and bonuses to contractors with documented performance issues” not later than 180 days after the enactment of the fiscal 2022 omnibus spending act.

“The report shall cover the previous two fiscal years for each military service and defense agency including at a
minimum: an analysis of the number of contracts that have paid awards or bonuses to a contractor documented to be delivering unsatisfactory performance; the amount of awards or bonuses that have paid out under such circumstances; the total percentage of such awards and bonuses paid out, as a portion of total awards and bonuses over the same timeframe; an analysis of the department’s policy governing payment of awards and bonuses under such circumstances; and recommendations for any changes to authorities or policy that would eliminate payments under such circumstances to implement any recommendations.”

In a brief interview after his presentation at the McAleese & Associates defense conference on March 9, Air Force Lt. Gen. Eric Fick, the F-35 program executive officer, said that although 2021 had seen a worrying fall in F-35 MC rates, the MC rate last year was comparatively higher for combat-coded F-35As.

“The interesting thing is when I looked to my subfleets, to my operational fleet, I looked at the overarching numbers, and the [MC rate for the] combat-coded fleet of USAF F-35As, it’s actually pretty darn high,” Fick said. “What we have is a gradient of MC rates that reflect where the different portions of the fleet are.”

Fick said that the MC rates that the F-35 variants need to reach for Lockheed Martin to get the incentive bonuses are “graduated every year” and that the program awards no bonuses for “static”/non-improving MC rates.

Last week, Air Force Gen. Kenneth Wilsbach, the commander of Pacific Air Forces (PACAF), said that F-35As in the Pacific

are the newest versions of the fighter and are not having the sustainment problems found in older versions of the fighter (Defense Daily, March 4).

U.S. military commanders have often praised the advanced technological prowess of the F-35, including its ability to kill adversary aircraft at long range without being seen and to serve as a stealthy reconnaissance/command and control node, but whether DoD will be able to surge sufficient numbers of F-35s in a conflict seems uncertain.

While the F-35 is to have a “not mission capable for supply” (NMCS) rate of 10 percent, that rate has hovered around 17-18 percent and was 30 percent in 2018

Parts issues have included delays in supplying power modules for the Pratt & Whitney [RTX] F135 engine.

Last September, Lockheed Martin received the first multi-year sustainment contract for the F-35– a deal worth potentially $6.6 billion over three years (Defense Daily, Sept. 17, 2021).

In addition, the F-35 program continues to negotiate with Lockheed Martin on an award for the Lot 15-17 buy. The advanced technologies of F-35 Block 4 are to be fitted onto the F-35s beginning with Lot 15 in the summer of 2023, Fick said on March 9.

“We need to award the Lot 15 through 17 contracts,” Fick said. “I am committed to working closely with Lockheed Martin, with my warfighting customers, so that everyone understands the implications of the global economic situation we’re in, which has put pressure on unit recurring flyaway costs that we had all thought we would be looking at at this time. We are working tirelessly–my team, Lockheed’s team, their subs [subcontractors]–to come to agreement on this vehicle that allows us to recognize some of the pressures that industry is facing due to COVID, due to inflation, due to a reduction in quantities over the previous lot buy, which was 478 aircraft in [Lots] 12 through 14. There are pressures up against that negotiation, but there’s only so much money available so I have to make sure that we can buy as close as we can to the dollars we have.”

Fick said that the F-35 program began safety of flight qualification testing this week on the integrated core processor–the “brains” of the Technology Refresh 3 software upgrade to enable Block 4–and that the program “is driving hard to achieve that Lot 15 hardware cut-in” by the summer of 2023.

“To be clear, we are not out of the woods yet, but we are working in lockstep with our government/industry team to deliver this critical joint commitment,” Fick said.

While past F-35 sustainment contracts evaluated Lockheed Martin on the aircraft’s MC rates, last September’s three-year sustainment contract is to judge the company on full mission capable (FMC) rates and the on-time availability of parts to ensure FMC rates improve. Overall, the Government Accountability Office has said that the F-35’s FMC rate is 54 percent–18 points below the goal.

The F-35 program has said in the past that FMC rates depend on sufficient investments by the Air Force, Navy and Marine Corps in spare parts and flying hours.

In addition to improved FMC rates and parts availability, the new sustainment contract is to judge Lockheed Martin on its aid in reducing cost per flight hour (CPFH) for the F-35. The global F-35 fleet is to see a reduction in CPFH from $36,100 in 2020 to $33,400 in 2023, and the F-35A is to see a reduction from $33,600 in 2020 to $30,000 in 2023.

The three-year sustainment contract to Lockheed Martin is a stepping stone to a possible performance-based logistics (PBL) contract revision this year, if the company meets the CPFH, parts availability, and FMC rate goals.

MC rates for the three F-35 variants have been below targets. In November last year, the F-35 program said that quarterly MC rates for the F-35A and the F-35B were 59 percent—31 points below the objective for the F-35A and 26 points below the goal for the F-35B, and that the quarterly MC rate for the F-35C was 54 percent—31 points below target (Defense Daily, Nov. 12, 2021).

In fiscal 2020, such rates were 71 percent for the F-35A, 68 percent for the F-35B, and 59 percent for the F-35C, per the Government Accountability Office (GAO). For fiscal 2020, the Air Force reported a higher 76 percent MC rate for the F-35A, which the service said had the highest MC rate for the service’s fighter models–above the second-ranked F-16C at nearly 74 percent.

For DoD, the MC rate is the percentage of unit-assigned aircraft capable of performing at least one defined mission, not including aircraft in depot status or undergoing major repairs. FMC planes are those capable of flying all unit-assigned missions.