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OSD Squeezes JSF Costs Harder

UPDATED:OSD Downplays Kendall Comments, Says His Figures Were "Hypothetical"

Frank Kendall, principal deputy undersecretary of defense for acquisition, technology and logistics, told an international defense conference today that the Pentagon is "on the path"  to buy 85 planes for the cost of 80.

Kendall wasn't crystal clear about whether Lockheed Martin had succeeded in lowering costs or whether the Pentagon was pressing hard to get them to lower costs. The consensus among those I spoke with at Comdef 2010 (a Washington conference targeted on international defense policy and acquisition) was that Kendall was pushing hard for a lower price during the LRIP 4 negotiations and Lockheed may have slowed or reversed the soaring cost growth that had afflicted the program.

A Lockheed spokesman pointed to the lower costs as a clear demonstration of the company's "confidence in our estimates." John Kent said, "F-35 low-rate initial production lots 1-3 were settled below government estimates and we expect LRIP 4 to settle below government estimates as well. LRIP 4 will be a fixed-price incentive fee contract for all variants – which is two years earlier than the program acquisition strategy..."

But a few hours after Kendall spoke the Pentagon was heading as far and as fast away from his comments as they could get. "Mr. Kendall was giving an illustrative hypothetical example to illustrate that the Defense Department hopes to realize savings that would be reflected in increased quantities of equipment that could be bought for the same amount of dollars as opposed to a reduction in the defense budget," Cdr. Wendy Snyder said in an e-mail response to questions. "The example had no direct correlation to any actual expectations for the F-35 program, although in general the Department is working to realize F-35 costs that are below current projections."

Regardless of just how much the Pentagon hopes to disavow Kendall's comments, they are clearly illustrative of what is coming. And it does not necessarily call into question the Joint Estimating Team's research and development estimate, a congressional aide said. Lockheed's new production model -- which they estimate will reduce costs by 20 percent -- could substantially shift the price picture.

But, as the congressional aide said, "In the end the buy will get reduced, who knows how much, and that will have impacts." Of course, when you cut the number of aircraft you plan to buy, the cost per plane rises and that may well look bad for the JSF program all over again.

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