USAF Lt. Gen. Christopher Bogdan, F-35 PEO and survivor of the Air Force's KC-46 competition (he led that effort), once again had the audience rapt at the annual Air Force Association conference this week. He's known for plain speak and for holding ccontractors and stakeholders in major programs to their word. And, if they don't keep their word, he's known for calling them out.
Lorraine Martin, general manager for Lockheed's F-35 program, says that one of her measures for the relationship's status was the negotiation for the low-rate, initial production Lot 6 and 7 contracts. Talks for the LRIP 5 deal took nearly a year and got publicly contentious between the government and former Lockheed Martin CEO Bob Stevens. LRIPs 6/7 took half as long to ink and resulted in Lockheed Martin assuming all liability for cost overruns to the airframes, a first and a goal Bogdan was adamant about 12 years into the program. And, Martin says, this is the first deal in which the F-35A's target cost is under $100 million.
Having metaphorically changed their relationship status on Facebook over the past year, the team is taking the relationship to the next level and moving in together -- in a manner of speaking. Lockheed Martin is offering space in its glitzy Fighter Development Center in Crystal City (a business park full of government ccontractors near the Pentagon) to house the "Cost War Room," Bogdan said during his Sept. 17 speech at the AFA conference.
CEO's of each of the top F-35 contractors -- Lockheed Martin, Pratt & Whitney and Northrop Grumman -- to put people in the War Room with the sole purpose of working together to wring cost out of the program. Not only is the F-35's cost notoriously twice that of estimates early in the program, a $1 trillion + figure released by the Pentagon for lifecycle cost continues to give customers sticker shock.
LRIP 7 is the first contract in which the projected price of F-35 is under $100 million (read Av Week's article on that development here). And, over the next five years beyond LRIP 7 at 35 aircraft, the production rate is expected to double, Bogdan said. More than 50% of the projected increase in ramp rate is due to orders from allies, Bogdan says. This momentum is intended to offer the market a “fifth generation capability at 4th generation price” by 2019, he says. He did not specify a unit cost, but in a talk less than a year ago, he cited a goal of between $80-90 million per aircraft (read our piece here). Time will clearly be the judge of the success or failure of that goal.
Likewise, however, the War Room will be targeting the sustainment cost for F-35. Bogdan acknowledged that his office's estimate for lifecycle cost for the U.S. program -- including Navy, Marine Corps and USAF jets -- at $857 billion, far lower than the older estimate. But, the Pentagon has yet to codify that into the selected acquisition report (SAR), or program of record. The ongoing debate on sustainment cost in the U.S. has some foreign customers worried that they could be investing in a money pit.
But, Bogdan says the program office is now planning to work with each foreign customer to come up with a lifecycle estimate based on its unique policies and procedures to address such concerns.
The Cost War Room will consist of cost analysts and supply chain experts from each of the top companies (though BAE was not mentioned) collocated and with the singular goal of addressing price. Bogdan says he is "cautiously optimistic" that this effort will produce positive results. He cited success in using this concept by the Virginia Class Submarine and Typhoon programs.
Just as an aside, I'm guessing most of our audience remembers the famous line in Dr. Strangelove. In the War Room. "Gentlemen, You can't fight in here, this is the War Room." Hoping that there are some good fights in the Cost War Room, and that taxpayers will see the results.