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Friday, February 18, 2011

F-35 LRIP V Discussions To Kick Off Soon

As the U.S. government and Lockheed Martin continue restructuring the $382 billion, multinational F-35 Joint Strike Fighter program, the parties are preparing for negotiations on the next production lot and to reset the original development contract in light of a recent cost overrun and delay.
Lockheed Martin is expected to submit its proposal for the fifth low-rate, initial production (LRIP) lot of F-35s to the government in the next couple of weeks, kicking off another round of negotiations.
Though the Pentagon requested 42 aircraft in its fiscal 2011 budget, this has been cut to 32 under the restructuring. But Congress has not yet approved a budget for fiscal 2011, which began in October 2010. Program funding is frozen at fiscal 2010 levels, and the JSF Joint Program Office lacks clear guidance on how many aircraft it has the authority to purchase through LRIP V, says U.S. Navy Vice Adm. David Venlet, the program director.
On Feb. 15, during his first public remarks since taking office last spring, Venlet said that he feels he can “navigate” proceeding with the development contract without further guidance from Congress. But he “needs clarity” on the production quantity for the next lot. “I believe we are close to that,” he says, referencing talks with lawmakers. Venlet made his remarks during a luncheon hosted by the National Aeronautic Association.
The protracted — and some say contentious — negotiations between Lockheed and the government for LRIP IV laid a solid foundation to proceed with LRIP V talks, Venlet says. He declined to predict whether the negotiation process would proceed more quickly than the last deal, which was agreed upon in November. LRIP IV “was a very data-based negotiation,” he says, citing the use of much actual data from previous lots to arrive at a fixed price for all three F-35 variants.
Venlet says that “performance is stabilizing and becoming more predictable in Fort Worth,” where Lockheed assembles the single-engine, stealthy fighters, and throughout the supply chain. Meanwhile, there must also be talks to renegotiate the massive development contract, which was signed in 2001. Originally, development was estimated to cost $38 billion; it is now predicted to require about $59.4 billion.
Through the restructuring, the Pentagon has added more than 1,800 test sorties to the program. “We have built a plan with realism in it,” Venlet says, noting that now 7,700 flights are expected for testing. This additional scope will be part of the talks on how to reset the development contract.
Venlet says he is confident this most recent restructuring for JSF will stand. “We can absorb the learning from the discovery that always happens in flight test,” he adds. Venlet says the restructured program provides management reserve to handle events that may pop up and injects much-needed “realism” throughout the entire program.
A year ago, Defense Secretary Robert Gates announced he was withholding $614 million worth of available award fees on the development contract, owing to poor performance from Lockheed Martin. The development contract renegotiations will determine how much of that money can be earned back by the company. Venlet said the incentives will be “very performance-tied.”
He did not estimate when the discussions would be completed.

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