UPDATED: Lockheed, Pentagon Agree On LRIP 4 Deal; Price Is Below $5 billion
After something like seven months of bare-knuckled negotiations, Lockheed Martin and the Pentagon have agreed on a price in a fixed price incentive contract for the fourth lot of low rate of initial production F-35s. “We have reached an agreement with the government on the fourth production lot of F-35s that brings us to 63 production aircraft on contract for five services in three countries. We remain confident that this agreement keeps us on track to reach our long-term price projections for the F-35 at full-rate production," Lockheed spokeswoman Jennifer Whitlow said in a prepared statement.
How tough were the negotiations? Few people are talking, but one Pentagon official told me this several weeks ago: "Lockheed just doesn't seem to get it. They work for us." This may not have been a reference to the Lockheed slogan, "We never forget who we're working for," but it sure sounded like it. And the comment was delivered with something close to anger.
That the world's largest defense company knows times have changed is evident in the rest of Whitlow's statement: "We know we have to adapt to the new reality that we face, with more demanding affordability goals that place an even greater premium on program execution, and we are committed to meeting that challenge."
Pentagon spokeswoman Cheryl Irwin put out a statement saying that the price was "below the independent cost estimate prepared earlier this year." That is a reference to the Capabilities Assessment and Program Evaluation price of $113 million per plane (in adjusted 2002 dollars) for what is assumed to be 32 aircraft.
One figure being offered for the contract value is $5 billion. However, we hear this is too high though we could not find out just how much too high it might be.
The importance of the price per plane cannot be overemphasized. "Once they sign LRIP 4, they can never change the price number. It can only go down. That's why the negotiations have gone on so long." said one industry observer. Lockheed has argued that it will reap enormous savings once the plane gets to full rate production and the further it gets from early production models the harder it would be to argue for a price increase.
Among the key factors to watch as details leach out about the deal are: How many STOVL versions of the F-35 are still in the LRIP. If the new deal drops the number below 13 -- the administration request -- that could have a substantial impact on the price per plane. One factor to consider is that the Senate Appropriations Committee signaled its intent to knock down funding for three of the F-35Bs. Next, consider how many planes there are in the LRIP overall. The A and C versions of the plane seem to be in pretty good shape in terms of production and performance. The B version -- the STOVL -- continues to have parts and production problems, and it is much more complex than the other versions.
Irwin's statement went on to say that the Pentagon "continues to closely monitor and aggressively manage this important program." You betcha they will.
Following is the story I put up earlier today on JSF opinions.
The Senate Appropriations Committee's tough language last week on the future of the Joint Strike Fighter clearly hit a nerve, eliciting more than 135 comments from Buzz readers.
The committee cut 10 planes from the administration's request and said they considered cutting all funding for the plane. It looks as if no defense appropriations bill will pass this year, but the committee's views will still resonate in the Pentagon since the Senate is unlikely to change too much in the coming election. Given the volume of comments and the sharp reasoning in some of them I thought it would be helpful to cull the best-written, most creative and most authoritative (not necessarily true for each and all) and give you a compact version of the comments.
Julio wrote: The JSF and F-22 are self-licking ice cream cones. Pilots shouldn't be allowed to make these decisions. They're still living in the stone ages and unwilling to give up turning & burning and yanking & banking a $100M piece of equipment. Most people pay to ride the roller coaster on fixed track. They get paid to make their own. The WWI thinking behind the Maginot line didn't work so well in WWII for the French.
Software is so sophisticated and computing power so great now that UAVs can out think human reactions, are cheaper and lighter with higher performance --they're not hauling overpaid zoomies around. A jailbroken iPhone programmed by a Pakistani or Korean immigrant (you hardly see Americans working at tech companies anymore) attached to a JATO with fins would give the U.S. taxpayer better bang for the Yuan.
Really, Is a fraction of a dB of LO or STOVL really going to matter? Fundamentally, does the expense of these impressive machines help us compete for the same limited natural resources as a burgeoning middle class of 1.3 billion Chinese demanding energy to run their new automobiles and air conditioners? Better brush up on your Cantonese and Mandarin. Quantity has a quality all its own
The spiral acquisition advocate:
Ed Orr wrote: Gee, look at the B-52s and KC-135s and how long they've lasted, and how about the venerable C-130. They just keep making them and modifying to meet today's demands. Why not rewing the F-15s, put new equipment in them and make them last 30 more years.
The UAS advocate:
Tony C. writes:
The future belongs to UCAV's and the Pentagon knows this, but until the technology matures has to keep with manned weapon systems. The F-35 is the last manned fighter we will build and all the teething problems did exist on the F-15, F-16, and F-18 programs in the beginning. The F-22 is a great aircraft, but at only 188 in the inventory, would be hard pressed to deter anyone. Scale back the F-35 requirements and build a cheap disposable aircraft like the F-16 and F-18. Then when the UCAV technology matures we can send them in to destroy the enemies integrated air defenses. Use the manned aircraft for follow up strikes on undefended targets. The fiscal hawk
Why are we wasting our time and money on this garbage? Acq program cost estimate has increased from $231B to $323B (40% overrun) (for less platforms, BTW). Procurement Unit cost increase from $69M to $112M, (62% overrun). This is given DoD's optomistic learning curve assumptions, which historically do not get realized anyway. Never again authorize a MS B for a 10 year development program that doesn't result in a good product, just uncertainty. Listen and learn, people: if there are not real consequences to acquisition program mismanagement, and bad behavior is rewarded, then future programs will repeat the same mistakes. Ya'll need to learn how to develop a product. F-35 hasn't even completed flight test, you got NOTHING. You're comparing performance of a NOTHING dream machine, with war-proven weapons.