The Pentagon and Lockheed Martin are continuing to hammer out the next F-35 production contract, though the program executive officer said officials are facing "some pretty stiff headwinds we're working to counter" that he expects will push a final agreement past this month.
Meanwhile, Lt. Gen. Eric Fick told a small group of reporters today it’s “likely” the agreement will include an increase in costs per aircraft as compared to the latest low-rate initial production lot, potentially pushing prices above the $80-million-per-jet threshold, including engines, for the conventional-takeoff-and-landing model.
The in-the-works deal covering Lots 15-17 will include "on the order of 400” aircraft, Fick said -- fewer than the 478 F-35s included in the Lot 12-14 contract. Though he declined to name a specific price, saying it’s “early to say where I think that they’ll end up,” he noted it’s “likely that we’ll see costs rise on a tail-by-tail basis.”
As part of the Lot 12-14 deal, the F-35A, the conventional model for the Air Force and most international customers, fell below $80 million per platform.
For the forthcoming deal, a Lockheed executive in January during the company’s fourth quarter earnings call said discussions were hung up over incorporating the effects of inflation and COVID-19 into it, as well as “the impacts that we see associated with our customers that order in fewer aircraft in lots 15 to 17 than were ordered in the prior buys of 12-14.”
Fick underscored those issues today, noting he is “losing confidence” that a deal could come together in March, which he said was “a revised target” for the program after blowing past an October 2021 completion goal.
“We’re trying to figure out how we sort through the headwinds and lead through them to find a place that allows us to get the aircraft we need at a cost that we can afford, while still recognizing some of those challenges that Lockheed faces,” he said.
Despite the “tough negotiation” with Lockheed, Fick ruled out imposing a unilateral contract. The Pentagon leveraged the rare mechanism, formally known as an undefinitized contracting action, in 2016 for its $6.1 billion Lot 9 production deal, which covered 57 aircraft.
“I don’t think we can foist a contract on them to make them accept it,” he said. “We have to continue to work with Lockheed to figure out how we get through it, but I would not be surprised if our settlement prices were higher than they were in Lot 14.”