Pentagon finalises deal with Lockheed for 71 F-35s

Washington DC
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The Pentagon finalised a deal on 24 September to buy 71 F-35 Joint Strike Fighters from Lockheed Martin. The aircraft will be part of the sixth and seventh low rate initial production (LRIP) lots for the stealth fighters.

“Lockheed Martin is extremely pleased with the LRIP 6 and 7 contract signing, which represents a significant milestone for the F-35 programme and its path to enhanced affordability,” says Lorraine Martin, Lockheed’s vice-president and general manager for the F-35 programme. “With each successive production lot, unit costs have declined. That’s a trend we look forward to continuing as this programme moves toward full rate production and operational maturity.”

The F-35 Joint Program Office (JPO) also issued a statement in the same release hailing the deal. “These agreements are a significant milestone for the F-35 programme, and reflect cost reduction initiatives shared by government and industry,” the JPO says.

The total LRIP 6 contract is worth $4.4 billion, funding the production of 36 aircraft. According to the government and Lockheed joint-released statement, the average aircraft unit cost is approximately 2.5% lower than the previous production lot.

Not counting the price of the engine, which is a separate contract with Pratt & Whitney, 23 F-35A model aircraft are being purchased for $103 million per aircraft, while six F-35B will cost $109 million each. The seven F-35C bought under LRIP 6 will cost $120 milion per jet.

The LRIP 7 contract is valued at $3.4 billion and covers the production of 35 aircraft. The average aircraft unit cost will be about 6% lower than LRIP 5 aircraft. Prices for LRIP 7 aircraft without the inclusion of the engine are $98 million each for the 24 F-35A model jets, $104 million each for seven F-35B model aircraft and $116 million per aircraft for four F-35C aircraft.

Lockheed Martin is expected to begin delivering LRIP 6 jets in the second quarter of 2014 and LRIP 7 jets in the second quarter of 2015. “The LRIP 6 and 7 contract terms reduce the government’s exposure to target cost overruns relative to previous LRIP contracts,” the statement reads. “In the LRIP 6 and 7 buy, Lockheed Martin will cover all cost overruns. The government and Lockheed Martin will share returns (20/80) derived from any under runs in target cost.”

Both contracts are performance-based, which means Lockheed will receive incremental payments as it meets various goals set forth in the contracts. Additionally, a concurrency clause in both contracts requires Lockheed to share costs equally with the government for known concurrency changes coming out of testing. “Newly discovered concurrency changes identified during LRIP 6 and 7 production periods will be authorised via engineering change proposals,” the statement reads.