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Deadline passes for Lockheed F-35 contract appeal, but options remain

The deadline has passed for Lockheed Martin to file an appeal with the Armed Services Board of Contracts Appeals over the unilateral terms imposed on the ninth lot of low-rate initial production contract for F-35s, but alternative legal avenues may still remain to overturn the deal.

Lockheed had 90 days from the point of the November contract award to decide whether it would file an appeal, but that deadline passed at the end of January, a Lockheed spokesman tells FlightGlobal. But there are other ways Lockheed could still dispute the unilateral contract, including filing a certified claim under the Contract Disputes Act, filing a request for equitable adjustment, and requesting alternate dispute resolution under the Joint Strike Fighter memorandum of agreement, an industry source tells FlightGlobal.

Lockheed is building, but has not delivered, LRIP 9 jets and the first jet from the lot flew in early January. The company will build the jets and deliver them in 2017, whether the company appeals or not, a Lockheed spokesman says.

A legal decision would only affect the price of LRIP 9. If Lockheed filed for equitable adjustment, the company would argue the government committed an error in the contract and must pay the company more, Center for Strategic and International Studies analyst Andrew Hunter says. Whil a contract dispute deals with specific numbers, equitable adjustment addresses how the contract is enforced.

“Lockheed Martin must now execute a contract under the terms, conditions and price set forth under LRIP 9,” a Joint Program Office spokesman says. “They may file a claim in accordance with the disputes clause of the contract.”

When asked during a 24 January fourth quarter 2016 earnings call whether Lockheed would take legal action on LRIP 9, chief executive Marillyn Hewson intimated the company was in no rush to appeal.

“On LRIP 9, we’re not under any pressure to do anything,” she says. “We’re going to continue to look at our options on LRIP 9.”

Hewson also said Lockheed was very close to an LRIP 10 deal, which would include 90 jets, and the company expects to negotiate lot 11 by the end of 2017. That year will mark a significant ramp up for the F-35 production line, with 66 aircraft expected to deliver by the end of the year compared to 46 delivered in 2016.

With those deals still in the pipeline, some analysts doubt that Lockheed would take legal action that could upset the Pentagon.

“I would be very shocked if they did any of those,” says Dan Grazier, a fellow at the Project on Government Oversight. “This is speculation, but it’s pretty obvious Lockheed is trying to get the block buy signed, so the last thing they want to do is frustrate the Pentagon with paperwork.”

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