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​Unilateral negotiations still in play for F-35 contract

Despite the lingering threat of legal action from Lockheed Martin following a unilaterally negotiated contract for low rate initial production (LRIP) Lot 9 for the F-35, the US Defense Department could still deploy the controversial measure to decide the contract price for Lot 10.

In late November, the DOD awarded Lockheed a $1.2 billion contract as part of an undefinitised contract modification to lot 10. The award covered advanced procurement for 90 aircraft, including foreign military sales customers, and the contract’s ceiling hits $7.1 billion.

But that UCA also allows the Pentagon to unilaterally negotiate LRIP 10, F-35 programme executive officer Lt Gen Chris Bogdan told reporters on 19 December.

“So what just happened? LRIP 10 went on an undefinitised contract, so it is a fact that that contract could now be available for unilateral determination,” he says. “Do I want that to happen? Absolutely not. Do I think that will happen? I do not believe so. We want to negotiate in good faith and come to a bilateral agreement with Lockheed Martin.”

After 14 months of intense negotiations, the Pentagon moved forward on its own with the LRIP 9 contract. Under the $6.1 billion award, Lockheed will deliver 57 F-35 airframes. Including engines, the mandated pricing per aircraft amounted to $102.1 million for each F-35A, $131.6 for each F-35B and $132.2 million for each F-35C.

Bogdan notes that while the Pentagon mandated the aircraft’s price, Lockheed and the government worked together on all other terms of the contract including schedules and configurations.

Lockheed is still weighing whether it should reject the LRIP 9 contract’s terms through an appeal with the Armed Services Board of Contracts Appeals. The company has 90 days from the point of the contract award to decide, a source tells FlightGlobal.

The Joint Programme Office will meet with Lockheed to begin initial negotiations on LRIP 10 by mid January, Bogdan says. The two parties had to wait to clear Lot 9 and put a UCA in place on LRIP 10 before moving ahead, he says.

During a speech in Washington earlier that day, US Air Force Secretary Deborah Lee James also hinted at the possibility of a unilateral contract for LRIP 10.

While negotiations for LRIP 9 were unusual, the secretary did not count out Bogdan’s office using the same strategy in the future. In the face of criticism from president elect Donald Trump, who has called for more draconian negotiations on major acquisition programmes including the F-35, reporters asked James whether the defense industry might see more unilateral contracts.

“I think the unilateral action came as a result of a very, very prolonged period of negotiation and it was a feeling where there just wasn’t going to be any more progress made,” she says. “That’s a fairly unusual thing, it’s not done all that much so I wouldn’t say it might more or less in the future.”

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