Lockheed's F-35 faces second restructuring this year

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Facing a new round of cost overruns and schedule delays, the Lockheed Martin F-35 programme will finish the final two months of 2010 in much the same way as it opened the year.

One more year of development and an extra $5 billion may be added on top of previous extensions, according to the preliminary findings of a major F-35 review leaked by the Center for Defense Information (CDI), a well-connected think-tank.

If the Defense Acquisition Board (DAB), a group of Pentagon decision-makers on major contracts, adopts the findings of the technical baseline review (TBR) on 22 November, the programme will face a third major restructuring - and the second this year.

Lockheed declines to comment about the reports, saying "it would be premature to discuss the results of the TBR until the findings of the DAB have been released".

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

According to the CDI, development of the conventional take-off and landing F-35A and carrier-based F-35C will be extended by one year to 2017. The in-service date for the short take-off and vertical landing F-35B will be delayed at least two years to 2014, it says.

Those changes would increase total development costs since the programme began in 2001 to as much as $55 billion, a 57% increase. The length of the development phase would be extended by five years overall.

Moreover, it worsens an already tough year for the F-35 programme.

In February, US Secretary of Defense Robert Gates announced a major restructuring, acknowledging a then-$2.8 billion overrun and a three year-delay for the F-35A's service entry.

Gates replaced the then-joint programme office (JPO) chief with Vice Adm David Venlet, a seemingly curious choice. As head of the Naval Air Systems Command, Venlet last year presided over a NAVAIR budget analysis on the F-35. The document warned Gates that the JPO had badly underestimated F-35 procurement costs.

Last year, the JPO predicted the average procurement unit cost of 2,443 F-35s purchased by the Department of Defense would be $104 million. Gates's restructuring in February, which slowed the production ramp by 122 aircraft over the next five years, raised that estimate to $112 million.

But NAVAIR's analysts under Venlet decided the programme was in even worse shape, predicting average costs will rise to $128.5 million per aircraft.

By May, Venlet had taken over the F-35 programme, launching the technical baseline review that led to the proposed new restructuring. The TBR assessed the resources needed to complete the development phase of the F-35 programme.

As the review was under way, Lockheed appeared to be making strong progress in its flight-test programme. The F-35B completed its first vertical landing in March, and four new aircraft joined the flight test fleet through July. The F-35A fleet performed especially well, with three test aircraft completing 136 flights through 30 October, or nearly twice the planned amount.

However, positive steps were offset by shortfalls in other areas. Unreliable components slowed F-35B flight tests, with only 168 flight tests completed up to 30 October, against the 209 sorties planned. Lockheed has not delivered a new aircraft to the flight-test fleet since July, and four new F-35s must be delivered within two months to keep the programme on track.

Meanwhile, the first training squadron at Eglin AFB, Florida is waiting to receive the first two aircraft from the first batch of low-rate initial production. Even if these are delivered before the end of the year, it is not clear how useful they will be.

Lockheed had completed 458 test flights by 30 October, or less than 10% of the overall plan for the Joint Strike Fighter programme.

With so much of the flight-test programme remaining, Lockheed could face pressure to keep the F-35 on schedule and within budget, even if the preliminary findings of the latest review are adopted.

Last March, the US Government Accountability Office (GAO) raised doubts about Gates's one-month-old restructuring plan. Although Gates extended the flight-test phase by 13 months, the DoD's joint estimating team had predicted the programme needed at least 30 months to recover.

The GAO's auditors noted the "new plan has little schedule margin for error and will still be under pressure to accommodate the inevitable discovery of issues and retests that occur over the course of every flight-test programme".

In late September, Lockheed announced striking an agreement in principle with the DoD on an at least $5 billion deal to buy 31 F-35s in the fourth lot of low-rate initial production. The agreement appeared to end an extended round of difficult negotiations, as Gates demanded that Lockheed convert the contract from a cost-plus to fixed-price structure.

Six weeks after the agreement was announced, however, the contract remains unsigned.