Could it Be -- JPO and LockMart on the Mend?


Lt. Gen. Christopher Bogdan made it clear when he came to the Joint Strike Fighter program last year that one thing he would not tolerate would be foot dragging -- from his prime contractor, Lockheed Martin, or from his own staff.

The comment has been quoted repeatedly -- by Av Week and other pubs attuned to the F-35. But it is, once again, worth repeating.

The relationship between the program office and the contractor was the “worst I’ve ever seen” in his acquisition career, Bogdan told a room packed with contractors at the Air Force Assn. symposium in September. “It should not take more than a year to negotiate a contract when you have been doing business together for 11 years,” he said.

And, apparently, it won’t.

Lockheed Martin executives are expecting to finalize negotiations the next two lots of F-35s in the first half of 2013 and negotiations only just started after the cantankerous talks for low-rate, initial production (LRIP) 5 wrapped up in December. If this comes to pass, it would mark a turnaround in relations between the two parties.

Lockheed Martin’s new CEO, Marillyn Hewson, and CFO, Bruce Tanner yesterday told investors on an earnings call that they expect definitized contracts for LRIP 6 and 7 by the end of the second quarter of 2013.

Could it be that Bogdan’s willingness to shine a light on the program and reveal one of its major flaws has actually broken down some walls?

The protracted talks for LRIP 5 were not over terms and conditions, says Lockheed Martin CEO Marillyn Hewson. “It was really about the cost … We are working very hard to take cost out of our business,” she told investors during a second-quarter earnings call Jan. 24. These negotiations took place while former CEO Robert Stevens was still at the helm.

F-35 officials say the target price for LRIP 5 aircraft is 4% lower than LRIP 4.

The company received undefinitized contracts late last year for LRIP 6 because the company needed cash to keep the aircraft rolling down the assembly line. This lot is slated to include 18 F-35As for the U.S. Air Force, six F-35Bs for the Marine Corps and seven F-35Cs for the Navy. Also in LRIP 6 are five international aircraft — three for Italy and two for Australia.

The price is not to exceed $3.7 billion for the U.S. aircraft, and four separate undefinitized contracts worth up to $1.2 billion were also issued for U.S. spares and support for LRIP 6 . Negotiations with engine provider Pratt&Whitney are still under way for LRIP 5.

Lockheed Martin is already operating with some long-lead funding for LRIP 7. But a definitized contract signed for this lot by midyear would be the first time in years that the program has not had to function under an undefinitized contract action to keep cash flowing while cantankerous negotiations are under way.

LRIP 7 is slated to include 35 aircraft: 19 F-35As for the Air Force; six F-35Bs for the Marines ; four F-35Cs for the Navy and six international fighters. They include three F-35As for Italy and two for Norway. The U.K. is slated to buy a single F-35B in LRIP 7.

Turkey was set to buy its first two aircraft in this lot, but those have slipped two years.

Also this year, Lockheed Martin expects to receive its first long-lead funding for LRIP 8. In this lot , production is slated to leap from 35 to 48 aircraft , including nine for delivery to foreign military sales customers, such as Italy and Japan, that were not part of the F-35 development partnership.

The planned breakout for LRIP 8 is as follows: 19 F-35As for the Air Force, six F-35Bs for the Marines, four F-35Cs for the Navy, four F-35Bs for the U.K., two F-35As for Norway, four F-35As for Italy, five F-35As for Israel and four F-35As for Japan.

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