The real story behind a $7.4 billion F-22 contract goof

f22 formation.jpgTo set the record straight, Lockheed Martin has not received a new $7.4 billion contract to fund upgrades for the F-22. However, a variety of news outlets, including Reuters and a Time magazine blog, as well financial analysts can be excused for getting the facts confused. They were simply reporting the verbatim text of an inaccurate Department of Defense contract announcement on 18 November.

But the truth is far more interesting.

Reuters accurately clarified that the contract is merely an increase in the cost ceiling of a contract awarded 10 years ago, but that’s not quite the whole story either.

In reality, the contract award reveals a potential $1.4 billion cost increase as part of an overall, 20-year plan now worth up to $23.4 billion to continue funding F-22 upgrades. The extra money was necessary to pay Lockheed to change the F-22′s advanced tactical data link, accelerate the production line shutdown by four years, launch two structural upgrade programmes and fund unexpected costs of upgrading F-22s with reliability and maintainability improvements.

It is the first — and last — cost ceiling increase for a potential $6 billion contract awarded to Lockheed in 2002 called the raptor enhancement development and integration (REDI).

Meanwhile, the USAF and Lockheed are continuing to negotiate a follow-on contract called REDI II, which will pay for upgrades and new development work over the next decade. The potential value of the REDI II contract is $16 billion. The total value of REDI and REDI II is $23.4 billion. 

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