The House-passed version of the fiscal 2022 defense authorization bill is eyeing possible competition to help reduce sustainment costs for the Lockheed Martin [LMT] F-35 fighter.
The House passed its $768 billion fiscal 2022 defense authorization bill in late September with a bipartisan 316 to 113 vote, but the Senate has yet to pass its version, and, even after that, the two chambers will have to meet in conference to resolve differences between the two bills (Defense Daily, Sept. 24).
The House Armed Services Committee (HASC) “is concerned about rising sustainment costs in the F-35 program, as these costs create affordability challenges for the [military] services,” per a report on the House-passed bill. “As such, the committee is interested in determining the Department of Defense’s plans to increase competition within the F-35 enterprise, including what intermediate steps could be taken in the near term to leverage the whole of industry outside the original equipment manufacturers. Increased competition for F-35 sustainment could reduce lifecycle costs, increase efficiency, and drive innovation while strengthening the overall viability of the program.”
The House bill would require Defense Secretary Lloyd Austin to brief HASC by March 1 next year “on the department’s efforts to reduce sustainment costs by driving competition into the F-35 program,” the bill report said. “The briefing should include information on known barriers that must be overcome to facilitate a competitive sustainment environment, as well as recommended solutions.”
Before Lockheed Martin beat Boeing [BA] to win the Joint Strike Fighter (JSF) competition on Oct. 26, 2001, there was concern at top levels of the Pentagon that the “winner take all” JSF acquisition strategy outlined by former Defense Secretary William Perry in 1996 could result in higher acquisition and sustainment costs. An idea was broached, but never adopted, to have Boeing, if it lost, use its experience with commercial airliners to institute a system to deliver needed JSF parts promptly. DoD acquisition executives looked to Caterpillar, Inc. [CAT] as another model of an advanced supply chain.
Beside sustainment, DoD thought also was given to bringing Boeing on as a second supplier, if Lockheed Martin fell short, and in having Boeing build the F-35 tail section, in part to help retain a minimum of 3,000 engineers as a critical mass on Boeing fighter development, rather than have such talent move on to other “capture” efforts on future contracts.
“There is a great deal of merit to the idea of having multiple contractors building a weapon,” said Dan Grazier, the Jack Shanahan military fellow at POGO’s Center for Defense Information and a retired U.S. Marine.
“It has been used successfully in the past where the contractor with the better price received 70 percent of the contract with the other getting 30 percent to keep their workforce engaged,” Grazier said. “The competition helps to control prices. The separate teams also find ways to improve the design. An example of this is the A-10 ammunition. The different manufacturers fiercely competed against each other which dramatically reduced costs. The only way such a plan would work is for the government to acquire all the intellectual property rights for the weapon which solves another huge problem with the F-35 program now. Because Lockheed Martin controls the data rights for the program, the government has no choice but to award Lockheed with the sustainment contracts year after year. Other than bad public relations, there is little incentive to reduce costs.”
Both the House-passed fiscal 2022 defense authorization bill and the one under consideration by the Senate contain provisions on F-35 sustainment costs.
The House bill, for example, would require the U.S. Comptroller General to conduct annual reviews of F-35 sustainment efforts for the aircraft and the engine between fiscal 2022 and 2025. The bill would also require Defense Secretary Lloyd Austin to submit a plan by March 1 next year to reduce F-35 sustainment costs, and the bill would mandate the defense secretary’s annual certification between 2022 and 2026 that the F-35 is meeting sustainment cost metrics.
The draft fiscal 2022 Senate defense authorization bill under consideration would require the Pentagon to move the management of F-35 sustainment from the F-35 Joint Program Office at Naval Air Station Patuxent River, Md., to the military services by Oct. 1, 2027–the U.S. Air Force for the F-35A and the U.S. Navy for the F-35B and F-35C.
One F-35 analyst said, however, that such Air Force and Navy management would balloon F-35 sustainment costs.