Low rate initial production (LRIP) is the hardest phase. It's one thing to develop an aircraft, and quite another to manufacture it. The phase between development to full-rate production has tripped up many programme offices in the past. For the F-35 programme, that struggle is personified in the strange and twisting saga of the LRIP V contract.
The F-35 programme office has revealed today that the Department of Defense will reduce the LRIP V procurement amount by five aircraft, which cuts some combination of F-35As and F-35Cs but preserves three orders for the F-35B.
This means the LRIP V order drops from 35 to 30 aircraft, but it's only the latest twist. The evolution of the LRIP V is tricky, but it basically breaks down like this:
- Up until two years ago, the DoD and Australia plans to buy 47 F-35s overall in LRIP V.
- Australia postpones buying their first batch of four aircraft by two years, cutting the total LRIP V number to 43.
- The first DoD restructuring comes next in February 2010, trimming the LRIP V order by one to 42.
- The second DoD restructuring in January 2011 is more severe. This time, the LRIP V order plummets by 10 to 32 aircraft.
- Congress doesn't like this arrangement, so it proposes raising the LRIP V amount to 35 aircraft.
- Now, the DoD cuts the number back to 30.
The number is continuing to fluctuate even one month after the fiscal year expired in which the contract should have been signed.
But the LRIP V award to Lockheed has been delayed by the most intense round of negotiations to date.
The DoD surprised Lockheed's negotiators about one month ago. Nearly six months after Lockheed submitted its proposal for LRIP V, the DoD decided to change the contracting terms. Now, Lockheed has to agree to pay at least some -- and maybe all -- of the extra costs caused by development mistakes. And the DoD is refusing to pay a $1.2 billion bill it owes Lockheed until the company agrees to the new terms.
[Click on the jump to read the programme office's full statement.]
Programme office statement (31 October)
The first three initial production contracts are exceeding target costs by 11-15 percent. The U.S. Government is responsible for paying $771 million. The F-35 Program Office is working with the services to make the necessary adjustments to pay the bills. To help fund over target and concurrency costs, the Air Force and Navy are expected to reduce their F-35 A and C procurement quantities for the fifth low rate initial production to 30 aircraft. Controlling costs is an absolute must. We worked for the last year to obtain substantial insight into F-35 manufacturing span times and costs. For the fourth year of production, we implemented a fixed-price type airframe and engine contract two years earlier than previously planned. Under this contract, overruns to the target cost result in equal sharing of overruns between the contractor and the Government up to a ceiling amount. Cost overruns that exceed the ceiling price are all paid by the Contractor. Early production aircraft always have higher costs that come down a learning curve. F-35 concurrency is generating significant change that both perturbs the learning cost reduction and adds costs for modifying delivered jets. We are pleased with signs of emerging stability in the manufacturing flow at Lockheed Martin, Pratt & Whitney and in their supplier teams. We have confidence in the plan to get the development program on track. We remain committed to reducing F-35 costs and delivering an extremely capable aircraft to the US Air Force, Navy, Marine Corps and our partner nations.