Lockheed, US government strike deal on next F-35 order

Washington DC
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The US government has reached an agreement with Lockheed Martin on the structure of a fixed-price contract worth more than $5 billion for up to 32 more F-35s.

The agreement is necessary before the Department of Defense signs a contract for the fourth lot of low-rate initial production, which orders F-35s projected for delivery after 2012.

The agreement ends a negotiating process that was extended by about four months to satisfy demands by the DoD for a fixed-price contract.

Lockheed previously delivered the Joint Strike Fighter under a "cost-plus" structure, allowing the contractor to be reimbursed for cost overruns.

Lockheed's $5 billion cost estimate for the new contract means the average cost for this batch of F-35s, excluding engines, is more than $156 million.

lockheed martin f-35 jsf pair, lockheed martin
  © Lockheed Martin

However, that number also includes the cost of extra production tooling to make the aircraft and spares.

The specific flyaway cost of each jet will be lower than the overall average, but details will not be known until a contract is signed.

The agreement, which includes one aircraft for the UK and an option for one for the Netherlands, means Lockheed now has commitments from the Joint Programme Office (JPO) to buy a total of 63 production aircraft.

The programme is still ramping up production as it transitions from development to manufacturing, but the process is complex. Lockheed has flown only about 10% of the roughly 5,000 flight tests split among the three F-35 variants.

Meanwhile, new documents released by the JPO reveal that more than half of planned orders in 2012 will be deferred to later years.

Last February, the DoD restructured the F-35 programme to reflect more realistic cost and schedule targets, deferring orders for 122 aircraft beyond fiscal year 2015.

As part of the restructuring, 118 orders between the USA and foreign buyers previously projected by the JPO next year have been reduced to 53.

The deferred orders mean Lockheed's production system will increase by only 10 compared to 43 aircraft orders currently projected in FY2011.

At the slower rate, Lockheed will be under pressure to maintain the planned rate of cost reductions with a slower learning curve.