Lockheed Inks Two More F-35 Contracts

The U.S. Defense Department has finalized a deal with Lockheed Martin Corp. for two contracts worth $7.1 billion for 71 more F-35 fighter jets.

The Pentagon announced the agreement for the sixth and seventh batches of aircraft, excluding engines, after the close of business yesterday. Both the government and the Bethesda, Md.-based manufacturer of the plane -- the world's largest defense contractor -- called it a "significant milestone" that takes into account efforts to reduce the program's cost.

The F-35 Joint Strike Fighter is the U.S. military's most expensive weapons acquisition program, estimated at $391 billion to develop and buy 2,457 of the fifth-generation, radar-evading fighter jets.

"With each successive production lot, unit costs have declined," Lorraine Martin, a vice president at Lockheed and general manager of the F-35 program, said in an e-mailed statement. "That’s a trend we look forward to continuing as this program moves toward full rate production and operational maturity."

It remains to be seen whether the cost reductions are enough to appease critics of the program on Capitol Hill. Sen. John McCain, R-Ariz., the 2008 Republican presidential candidate, this month called the acquisition effort "worse than a disgrace" and "one of the great national scandals."

His comments came just days after the Pentagon signaled an improving relationship with the contractor. Air Force Lt. Gen. Christopher Bogdan, the general overseeing the effort, said the relationship between the military and Lockheed, along with engine-maker Pratt & Whitney, part of United Technologies Corp., is “orders of magnitude” better than it was a year ago.

The contract for the sixth batch, or lot, is for 36 aircraft and valued at $4.4 billion -- about 2.5 percent less than the existing agreement.

The arrangement calls for 23 F-35As, the Air Force's version of the plane that takes off in a conventional manner, at $103 million apiece; 6 F-35Bs, the Marine Corps' variant that can fly like a plane and lands like a helicopter, at $109 million a piece; and 7 F-35Cs, the Navy's version designed to take off from aircraft carriers, at $120 million apiece.

Lockheed will begin delivering planes from this agreement -- which marks the first F-35 jets for Italy and Australia -- in the second quarter of 2014.

The contract for the seventh batch is for 35 aircraft and valued at $3.4 billion -- about 6 percent less than the existing agreement. The deal calls for 24 F-35As for $98 million a jet; 7 F-35Bs for $104 million a jet; and 4 F-35Cs for $116 million a jet.

The company will begin delivering planes from this agreement -- which marks the first F-35 jets for Norway -- in the second quarter of 2015.

Under the terms of the deals, Lockheed will pay for all cost overruns. However, the company and the government will split the costs of any so-called concurrency changes arising from System Development and Demonstration testing and qualification. On the other hand, if expenses are less than projected, Lockheed will get 80 percent of savings and the government will get 20 percent.

The F135 jet engine, which powers the aircraft, is funded under a separate contract.