The Defense Department and Lockheed Martin [LMT] have reached a handshake agreement for Lot 12 of the F-35 Joint Strike Fighter that allows for an $80 million F-35A to be delivered one year earlier than planned, company and department officials said June 10.

The agreement, which remains to be finalized with the F-35 Joint Program Office, includes $34 billion for F-35 Low Rate Initial Production Lots 12-14, and would include 157 aircraft in Lot 12 and 478 F-35s overall, said Ellen Lord, undersecretary of defense for acquisition and sustainment in a statement Monday. The deal was first reported by Reuters.

A U.S. Air Force KC-10 Extender refuels an F-35A Lightning II above an undisclosed location, April 30, 2019. The KC-10 and its crew were tasked to support aerial refueling operations for the F-35A’s first air interdiction during its inaugural deployment to the U.S. Air Forces Central Command’s area of responsibility. (U.S. Air Force photo by Staff Sgt. Chris Drzazgowski)

Lord noted in her statement that this production contract would be the largest yet for the F-35, and would achieve about 8.8 percent savings over the previous lot. The final unit recurring flyaway (URF) costs for each variant will be announced once the statutory certification is complete, but it estimates the delivery of an F-35A for less than $80 million in Lot 13, one year earlier than anticipated, she added.

“This agreement symbolizes my commitment to aggressively reduce F-35 cost, incentivize Industry to meet required performance, and to deliver the greatest capabilities to our warfighters at the best value to our taxpayers,” she said. A planned formal award is expected by August, she added.

Lord told reporters in a May media briefing that the Lot 11 F-35A unit price was reduced by over 5 percent compared to the previous lot price (Defense Daily, May 13). The Defense Department and Lockheed Martin agreed on the Lot 11 unit price of $89.2 million in September 2018.

Lockheed Martin has been working to bring the cost of an F-35A down to under $80 million, and this announcement comes as Congress appears willing to fund the Air Force’s request to procure new Boeing [BA]-made F-15EX aircraft, a fourth-generation aircraft the service said it needed to maintain a mix of fourth- and fifth-gen fighters within the budget constraints provided.

Greg Ulmer, Lockheed Martin vice president and general manager for the F-35 program, said in a statement that the unit price for all three F-35 variants was reduced in the agreement.

“With smart acquisition strategies, strong government-industry partnership and a relentless focus on cost reduction, the F-35 enterprise has successfully reduced procurement costs of the fifth-generation F-35 to equal or less than fourth-generation legacy aircraft,” he said.