The Pentagon and have settled on a price of roughly $3.8 billion for the next batch of fighters, after more than a year of negotiations, according to program sources.
A few details remain to be worked out on low-rate initial production (LRIP) Lot 5 for the Joint Strike Fighter program, though the contract is likely to be signed in days.
LRIP 5 includes 32 fighters, the same number ordered in the last lot by the Pentagon. Despite no increase in the numbers, prime contractor Lockheed Martin says the 22 conventional-takeoff-and-landing aircraft in the lot will be 50% less expensive than the first production models that were built in LRIP 1. At that time, the price was $220.8 million for a CTOL aircraft.
Officials at the Joint Strike Fighter Joint Program Office and Lockheed Martin declined to provide a per-unit target cost for those 22 F-35A aircraft, or the three F-35Bs (optimized for vertical takeoff and short landings) or seven F-35Cs designed for aircraft carrier use.
Company officials boast that the labor rate for LRIP 5 aircraft will be 14% lower than that for LRIP 4. Pentagon officials have grumbled about high labor rates in the F-35 and other programs as they have looked for ways to curtail spending.
Lockheed Martin workers at the Fort Worth assembly plant took to the picket line this summer over grievances regarding pay and benefits. Though the company populated the final assembly line with other workers, the production schedule fell behind. Michael Rein, a company spokesman, says 20 of 30 aircraft promised for delivery in 2012 have been turned over to the customer. “We are going to work hard over the next 30 days to get there” with delivery of the remaining 10 by year-end, he says.
In December 2011, the Pentagon and Lockheed Martin struck a deal on risk-sharing for so-called concurrency costs. This refers to the price of retrofits to already built aircraft based on design issues discovered in testing. Until Lot 4, the Pentagon picked up the tab to the tune of $136 million, or about $4.86 million per aircraft.
In LRIP 4, the Pentagon agreed to pay the first $52 million in concurrency costs; any additional overage would come out of Lockheed Martin’s award.
The terms of the concurrency risk-sharing deal for LRIP 5 were not provided by the company or the Pentagon. The agreement on LRIP 5 pricing, however, clears the way for the Pentagon to pay Lockheed Martin back for preliminary work on LRIP 6. Program officials refused to fund long-lead work on LRIP 6 without a deal for the current lot.
This agreement comes after more than a year of heated negotiations and at a tough time for Lockheed Martin.
Christopher Kubasik, who was tapped to be the next CEO of the company, resigned this month after a personal affair with a subordinate came to light. This leaves Marillyn Hewson, who was to be second in charge, as the incoming CEO at the beginning of next year.
Also this fall, the incoming F-35 director, Maj. Gen. Christopher Bogdan, said the relationship between Lockheed Martin and the Pentagon was the “worst I’d ever seen” in a program. He will assume command of the program Dec. 6 when Vice Adm. David Venlet retires.