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Lockheed Martin and the U.S. Department of Defense (DOD) reached an agreement in principle to fund the next two low-rate initial production (LRIP) lots of the F-35 Joint Strike Fighter, comprising 71 aircraft. The company and DOD jointly announced the “handshake agreement” on July 30 in advance of signing the LRIP contracts, which will provide consecutive, 4-percent reductions in the unit cost of U.S. military variants, they said. The parties said they will release cost details when the contracts are finalized.
“These two contracts represent a fair deal that is beneficial to the government and Lockheed Martin,” said Air Force Lt. Gen. Christopher Bogdan, the F-35 program executive officer, who in the past has been critical of the working relationship with Lockheed Martin. “Improving affordability is critical to the success of this program, and by working together we were able to negotiate a lower-cost F-35. There is still work to be done, but these agreements are proof the cost arrow is moving in the right direction.”
The agreement, which followed six months of negotiations, is for the F-35 air vehicle only, and does not include its F135 engine. The DOD and engine manufacturer Pratt & Whitney are still negotiating an LRIP-6 engine contract.
Lockheed Martin will deliver 36 jets to the U.S. military and partner nations under LRIP-6 beginning in the middle of next year; the delivery of 35 jets under LRIP-7 begins in mid-2015. The contracts cover the first F-35s for Australia, Italy and Norway, and the fourth F-35 for the UK. A total of 95 F-35s are under contract for LRIP-1 through 5. Lockheed Martin says it has delivered 67 jets to date, including test aircraft.
The unit price of an LRIP-7 jet will represent about an 8-percent reduction from that of the LRIP-5 contract signed in December 2012, the parties said. In a briefing at the recent Paris Air Show, Steve O’Bryan, Lockheed Martin F-35 vice president for program integration, presented a chart showing the current U.S. government predictions for the unit recurring flyaway cost of the F-35A conventional takeoff and landing version going forward. This shows a steady reduction from the $250 million paid for the first production aircraft contracted in 2009, to about $110 million in 2017 and $85 million in 2020. That price includes the aircraft, engine, mission systems and the cost of modifications to incorporate changes subsequently determined by the development test program (the so-called “concurrency costs”). O’Bryan noted that the predictions are in “then-year” dollars, which account for inflation. “The $85 million cost in 2020 would be $75 million in today’s dollars,” he said.