$6 Billion Payment to Lockheed Martin Keeps F-35 Production Humming

The contract action caps the price for the 255 airplanes in Lot 12 F-35s at $22.7 billion. Air Force photo by SrA. Alexander Cook.

The Pentagon paid Lockheed Martin just over $6 billion Nov. 14 to continue building F-35 Joint Strike Fighters. The contract action caps the price for the 255 airplanes in Lot 12 at $22.7 billion, including 20 more jets which Congress added to the Pentagon’s request. Congress added a further 16 jets to the Lot 13 buy, and the new agreement gets them on contract, as well.

The Low-Rate Initial Production (LRIP) contract is already underway, with long-lead funding approved several years ago, but the $6 billion payment keeps production moving “efficiently” while a the final contract is negotiated, a Joint Program Office spokesman said.

The $22.7 billion is a “not to exceed” figure only and the deal is “undefinitized” because it can still be modified to reflect a lower per-jet price. The Pentagon is negotiating separately with engine maker Pratt & Whitney for the Lot 12 jets’ F135 engines.

The Lot 12 contract continues the drive to reduce the unit price for F-35As to $80 million apiece in fiscal year 2020, the JPO spokesman said. In Lot 11, the most recent Lot, the unit price for the F-35A was $89.2 million. Those prices include the engine.

Unit costs have declined every year since 2012.

The award also includes some long-lead items – such as raw materials, castings and forgings – for the Lot 14 buy.

“This contracting funding strategy provides stability and a steady production rate over a defined period of time, which enables industry to plan and make investments that reduce overall cost and achieve greater manufacturing efficiencies,” according to a Pentagon statement accompanying the action.

Some of the money funds foreign airplanes included in a “block buy” deal negotiated with Lockheed for several years’ worth of aircraft at a time. This approach allows the company greater certainty about future production so it can buy parts and raw materials in larger quantities at lower prices.

Under US law, Block Buys are “multi-year production” contracts, which the government cannot enter into until the program achieves Milestone C, or “full rate” production. That should happen about a year from now after Operational Test and Evaluation is completed.

The 255 aircraft in the Lot 12 action include 106 for the US, 89 for international partners and 60 for Foreign Military Sales customers. The US aircraft will be delivered in fiscal years ’20 through ’22, but some jets bound for foreign air forces will be delivered earlier.

More than 300 F-35 fighters have been delivered so far to US services, partner countries and FMS customers. The US Air Force still plans to buy 1,763 F-35As, largely to replace its F-16 and A-10 fleets.