New Pressure on Lockheed Martin To Reduce F-35 Unit Cost

 - January 18, 2017, 7:27 AM
The second developmental test F-35C inflight. The new US President wants big cost savings in the Lightning II program. (Lockheed Martin)

The nature and extent of future F-35 fighter procurement is one of the many future policy unknowns in the U.S., as the new administration takes over on January 20. Two of incoming President Trump’s many tweets have criticized the program on cost grounds, evoking a pained response from manufacturer Lockheed Martin (LM). Trump has also suggested that the U.S. Navy should buy more F/A-18 Super Hornets from Boeing instead. But that is already happening, thanks to continuing Congressional plus-up additions to the U.S. defense procurement budget.

Responding to Trump’s opinion that “the F-35 program and cost is out of control,” Jeff Babione, LM’s executive vice president and general manager for the F-35 program, said that the company had invested “hundreds of millions of dollars to reduce the price of the plane by more than 60 percent.” He repeated the company’s goal of eventually reducing the unit cost to $85 million. LM chief executive officer Marillyn Hewson told Trump last week that “we are close to a deal on the tenth batch of F-35s that will bring the cost down significantly.” 

However, only 10 weeks ago protracted negotiations between LM and the F-35 Joint Program Office (JPO) for the ninth Low-Rate Initial Production (LRIP) batch of airframes failed, and the JPO imposed a contract for the 57 aircraft. It is worth approximately $6.1 billion and represents only a 3.7 percent reduction from the LRIP 8 contract signed in December 2014. The price does not include the engines, for which a separate contract was agreed with Pratt & Whitney as long ago as last April. The average unit cost for the LRIP 9 aircraft (42 F-35As plus 13 more costly STOVL F-35Bs and two of the most expensive carrier-capable F-35C versions) will be about $127 million, including engines.   

As for the U.S. Navy procurement policy, “the F-35C is a niche capability  and a complement, not a replacement, for the F-18,” Capt. Rich Brophy, the service’s head of carrier strike aircraft and programs told The Fighter Conference in London last November, organized by Defence IQ. He said that the Navy plans to eventually field two F-35C and two F-18E/F squadrons in each carrier air wing. To achieve this “desired end state,” part of the Super Hornet fleet would need a service life-extension program (SLEP). At that time Boeing was stripping down an initial two aircraft to discover what actions would be required in the SLEP to achieve a service life of between six and nine thousand hours, Brophy added.

In addition to the U.S. Air Force, Navy and Marines, the F-35 program is supported by the following eight partner nations: Australia, Canada, Denmark, Italy, the Netherlands, Norway, Turkey and the UK. Additionally, Israel, Japan and South Korea are foreign military sale customers for the fifth-generation fighter.


fake news from the MSM --
Pentagon, Lockheed near deal on $9 billion F-35 contract . . .negotiations are poised to bring the price per F-35 below $100 million for the first time

1. That's a contract with Lockheed for manufacturing ninety F-35 prototype airframes in Lot 10. You want an engine with that? The engine from Pratt is government-provided and bumps that "F-35 price" up another twenty million plus.
2. This is the "flyaway cost," not a price. The Pentagon doesn't buy F-35 prototypes with a single fixed-price contract, but buys them with many contracts to cover excessive costs and profits for these sweetheart deals. A rule of thumb is that the "flyaway cost" even including the engine represents only about half of the total purchase price, called the unit acquisition cost. Flyaway cost does not include the helmet display system, support and training equipment, technical data, technical support manpower, initial spare parts or even the gas and lubricants to make an F-35 usable. It also does not include the upgrades and fixes that testing and other flying experience reveals to be needed.
3. The Pentagon in Lot 9 has provided contracted funds under about twenty contracts to Lockheed and Pratt for hardware, software and initial support which average out to $200 million per aircraft delivered. Since F-35 prototype manufacturing has never been audited by the Defense Contract Audit Agency the Pentagon doesn't have a clue as to where those dollars actually ended up, whether for hardware or support or whatever, nor where they will end up in Lot 10. The Pentagon hasn't even been able to negotiate a mutually-agreed contract for manufacturing Lot 9 airframes, so the baloney is thick.
4. Even Bogdan doesn't buy this fake news. Bogdan Sep 15, 2014: "How much does it cost to buy an F-35? And I’ve got to tell you, you can measure that in so many different ways it’s not funny. We put out a SAR every year and in the SAR we’ve got a PUC and an APUC, which if you’re not an acquisition guy, that is just a crazy way of measuring things."