F-35 Chief, Boeing CEO Discussed Cost Savings with Trump

 - February 16, 2017, 5:02 PM
Air Force Lt. Gen. Christopher Bogdan, seen here in a file photo, is the Pentagon's F-35 program executive officer. (Photo: Bill Carey)

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The F-35 Joint Program Office continues to explore cost-cutting opportunities for the fifth-generation fighter and to compare the capabilities of the F-35C with the F/A-18E/F Super Hornet as part of a review ordered last month by U.S. Defense Secretary James Mattis. The twin focuses of the review resulted from conversations between then President-elect Donald Trump, Air Force Lt. Gen. Christopher Bogdan and Boeing CEO Dennis Muilenburg, Bogdan said on February 16.

In multiple tweets he posted in December before becoming president on January 20, Trump criticized the cost of both Lockheed Martin’s F-35 and the Boeing 747-8 that will serve as Air Force One under the Presidential Aircraft Recapitalization program. In the case of the F-35, Trump said that he had asked for a price estimate on a “comparable” version of the Boeing-built Super Hornet.

On January 26, Mattis ordered an F-35 program review “to determine opportunities to significantly reduce the cost” of the program. In parallel, he called for a review “that compares F-35C and F/A-18E/F operational capabilities and assesses the extent that F/A-18E/F improvements (an advanced Super Hornet) can be made in order to provide a competitive, cost effective, fighter aircraft alternative.”

Testifying before a subcommittee of the House Armed Services Committee, Bogdan, who serves as the F-35 program executive officer, said conversations he had with then President-elect Trump provided the impetus for Mattis’s order. Bogdan first met Trump at his Mar-a-Lago residence in Florida in mid-December along with other military officials to discuss the F-35 and the Presidential aircraft replacement programs. He later spoke with Trump by telephone on January 9, and again on January 17 with Muilenburg participating.

“The discussions that we had were all pre-decisional; there were no decisions made during those conversations,” Bogdan told the subcommittee. “It was my belief that President-elect Trump at the time was attempting to gain more information about the F-35 and its affordability, trying to gain more information about the F-35’s capabilities relative to the Super Hornet, and to gain more information about the Presidential aircraft replacement program. In fact, the questions that he asked, and the answers that I gave, were the foundation of the tasks that came out from Secretary Mattis two weeks ago, which are ongoing right now.”

The first task calls on the program to explain how it will keep the F-35 affordable now and in the future, Bogdan said. The second “is a Navy task about the complementary mix of advanced Super Hornets and F-35Cs on the deck of an aircraft carrier, where [Mattis] was asking for a comparison of the capabilities. We have yet to report the answers to the secretary of Defense,” Bogdan added. “I’m sure as soon as we report those tasks to him, he will then relay them to the appropriate folks in the administration.”

Earlier this month, the Department of Defense (DOD) and Lockheed Martin reached agreement on a 10th low-rate initial production (LRIP) lot of F-35s that set the price of the conventional A-model at $94.6 million—the first time the type has fallen below $100 million. “We believe we are on track to continue to reduce the price of the F-35 such that in FY19, with an engine, including all fees, the F-35A model will cost between $80 million and $85 million,” Bogdan told the subcommittee.

In written testimony, Bogdan said the program has crafted a production block buy/economic order quantity (EOQ) contracting strategy for LRIP lots 12, 13 and 14 that would give F-35 partner nations and foreign military sales customers the flexibility to procure all aircraft in LRIP 12 in Fiscal Year 2018, or to procure aircraft and engines in multiple lots. “There is no multi-year commitment for U.S. services’ aircraft and engines, which will continue to be bought on an annual basis for LRIPs 12-14 (FY2018-2020) and preserves Congressional annual discretion,” he stated. An order for 445 fighters using this approach would save an estimated $2 billion compared to the LRIP 11 annual procurement price, he said.

Bogdan reported that “steady progress” is being made toward finishing the $55 billion F-35 system development and demonstration (SDD) phase, though the program management “has always believed” that flight testing could extend three or four months beyond the scheduled completion date of October 31 this year. The DOD has directed the program “to maintain the resources necessary” to continue flight-testing to May 2018 to ensure that it delivers the fighter’s full Block 3F software release.

The remaining SDD work will cost an estimated $2.3 billion, which includes an additional $532 million above current funding. The additional cost is due to several factors; it includes $267 million attributed to “unforseen events” such as the June 2014 engine fire in an F-35A that caused the fleet to be grounded, and $165 million in new requirements. Further, the DOD shifted $100 million in F-35 funds to other priorities.

According to Bogdan, the SDD cost overrun will be “sourced from inside the F-35 program using management reserve, unearned fee and the savings resulting from negotiating lower costs on various contracts.”

July 2017
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