Negotiations on Consideration Package for F-35 Sustainment Contracts Expected to End Soon

The Defense Contract Management Agency (DCMA) and Lockheed Martin [LMT] are expected to finish negotiations on a consideration package that may reduce future contract payments to the company for sustainment of the F-35 Lighting II fighter by $183 million to $303 million.

“DCMA and Lockheed Martin are still negotiating the consideration with respect to the Electronic Equipment Log [EEL] issues on Ready-for-Issue [RFI] parts,” Mark Woodbury, a DCMA spokesman, wrote in a Sept. 17 email. “There is no legal or administrative requirement to end the negotiations by a certain date. However, we are anticipating negotiation completion before the end of September.”

Since April, Lockheed Martin and DCMA have been negotiating a possible repayment by Lockheed Martin of $183 million to $303 million of awarded F-35 funds to the federal government for defects in the Autonomic Logistics Information System (ALIS) (Defense Daily, July 22).

In June last year, the DoD Inspector General reported that the Pentagon received non‑RFI spare parts for the F-35 and “spent up to $303 million in DoD labor costs since 2015, and it will continue to pay up to $55 million annually for non‑RFI spare parts until the non‑RFI spare parts issue is resolved.”

Lockheed Martin received sustainment contracts for the F-35 of $388 million in 2015; nearly $647 million in 2016; $1.1 billion in 2017; $1.4 billion in 2018; $1.1 billion in 2019; and $1.9 billion this year.

The company has asked DoD to allow five-year sustainment contracts, versus the yearly such contracts, to save costs.

About 1,000 parts of the 50,000 parts on the F-35 require an EEL that designates a given part as RFI and able to be installed on the F-35. The EEL includes part history and remaining part service life in hours. Under the sustainment contracts, Lockheed Martin is required to deliver RFI F‑35 spare parts, such as wheel, seat, and window assemblies.

If a spare part lacks an EEL, maintainers are to submit an Action Request (AR) for Lockheed Martin to fix the EEL problem, which may also result from incorrect part information entered into ALIS. DoD personnel may also create EEL problems when they do not follow proper spare part maintenance procedures when removing or installing a spare part or when transferring a spare part between units, according to the DoD Inspector General.

“According to the DCMA, DoD personnel have submitted over 15,000 ARs from December 2015 to June 2018 to correct the non‑RFI problems,” according to the DoD Inspector General report. “Lockheed Martin charged the DoD for each AR submitted for non‑RFI spare parts. The cost reimbursement sustainment contracts included a clause, which stated that the cost of replacement or correction is an allowable cost.”

Air Force Lt. Gen. Eric Fick, the F-35 program executive officer, told lawmakers in July that the program, in one effort to address the ALIS issues, is thinking about removing the EEL requirement for about 600 spare parts that are not  safety critical nor life limited.

The F-35 program has also undertaken software updates for ALIS, and Pentagon acquisition chief Ellen Lord has said that the program has seen RFI rates increase from 43 percent in February to 83 percent in June for F-35s at Hill AFB, Utah; Luke AFB, Ariz.; and Marine Corps Air Station Yuma, Ariz.

The F-35 JPO and Lockheed Martin have begun a transition to the Operational Data Integrated Network (ODIN) cloud-based logistics program from the nearly 20 year-old ALIS (Defense Daily, Sept. 16). Greg Ulmer, Lockheed Martin’s F-35 general manager, said that the program has been able to port the ALIS software “onto the new ODIN hardware structure”–a fix that has gone through initial flight test at Naval Air Station Patuxent River.

While ALIS has 891 pounds of hardware, ODIN will have just 50 pounds of hardware.

Ulmer said that the F-35 program is seeking an initial operational capability for ODIN in the fall of next year, followed by full operational capability a year later.



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