Lockheed Martin has aired complaints about a US government decision to change the terms of its next yearly F-35 production contract more than five months after the company submitted its proposal.
Lockheed chief executive Robert Stevens disclosed in the company's third-quarter earnings statement that government negotiators have inserted a new issue into the negotiations over the contract for the fifth lot of F-35s in the low-rate initial production (LRIP) phase.
Three weeks ago, the F-35 joint programme office informed Lockheed that the company must absorb the higher costs of output in future aircraft because of redesigns and other problems discovered in prior years, Stevens said.
© Lockheed Martin
Moreover, the Department of Defense told Lockheed that payments now valued at $750 million will continue to be withheld until the firm agrees to the change of the F-35 contract structure.
Steven complained that "to have submitted [the LRIP 5] proposal in April, and to three weeks ago be confronted with a new contract requirement that wasn't reflected in the price we had offered"
"And then we were advised that the additional funding that we have been requesting since February was, in fact, conditioned on the successful negotiation of a concurrency clause. My preference would be to negotiate all the terms and conditions at the same time and not selectively address increments and pieces," Stevens continued.
The change exposes Lockheed to unexpected costs in the short-term and alters one of the fundamental terms for all weapon systems purchased by the DoD.
Despite Lockheed's objections about the government's negotiating style, Stevens did not say whether the company would reject the terms and accept the termination of the F-35 contract.
"I will certainly tell you our intention is to negotiate in good faith with the government," Stevens said.
The company is still grappling with the implications of the government's proposed change in the contracting terms.
"We're fundamentally ploughing some new ground here," Stevens said.
The disclosure of friction in the Lot 5 negotiation comes days after the programme achieved one of its most important goals in the flight test programme.
The US Marine Corps completed shipboard trials of the F-35B short take-off and vertical landing variant in 18 days.
The programme had scheduled the tests to run between two and six weeks, depending on the number of unexpected issues were to arose.