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Lockheed Gets $3.48 Billion Contract for F-35 Jets

Sunday, 21 Nov 2010 06:05 PM

Lockheed Martin Corp. received a fourth production contract for 31 F-35 Joint Strike Fighter jets valued at $3.48 billion as the Pentagon’s most expensive weapons program faces new questions over costs and delays.

Lockheed will build 16 planes for the U.S. Marine Corps configured for short takeoffs and vertical landings, 10 of the Air Force version of the jet, 4 Navy models and 1 for the U.K., the Pentagon said Friday. The Bethesda, Maryland-based company has an option to assemble a 32nd aircraft for the Netherlands.

The award provides a boost to Lockheed on the eve of a Nov. 22 review of the JSF led by the Defense Department’s top arms buyer, Ashton Carter. Development and combat testing is running more than four years behind schedule on the F-35, a program with a projected price tag of $382 billion.

Lockheed and the Pentagon will share on a 50-50 basis all overruns topping the F-35’s “target price.” Lockheed would have absorb the entire overrun once the price exceeds an upper- limit “ceiling,” while any savings for beating the target price would be split between the company and the government.

The contract caps a month of negotiations in which the Pentagon sought to convert from an agreement that paid the company all expenses plus a fee for profit while requiring the government to cover any overruns. Those were the provisions for the first 3 JSF production lots of 2, 12 and 17 planes.

Shifting to a so-called fixed-price incentive contract is a pillar of Defense Secretary Robert Gates’s bid to improve arms purchasing, with contractors incurring greater financial risk to ensure that programs don’t exceed budget projections. Companies also would reap bigger profits for beating the forecasts.

The JSF is the Defense Department’s largest weapons program. Different versions of the plane are designed to be used, with modifications, by the Air Force, Navy and Marines, instead of each service buying its own aircraft.

Lockheed gained 28 cents to $69.43 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 7.9 percent in 2010.

Next week’s Pentagon review of the JSF is the third such study in less than a year. Officials are supposed to receive details from an assessment conducted by the program manager, Vice Admiral David Venlet, as the Defense Department seeks to avoid “further surprises,” Pentagon press secretary Geoff Morrell said yesterday.

Venlet “has discovered additional issues that are of concern,” Morrell said. There is more software code “left to be written than what we thought,” said Morrell, who declined to give details on any potential new costs or delays and said no decisions were likely at the session.

Gates will take into account the review’s findings to determine the 2012 budget for the program, Morrell said. A Senate committee has voted to cut 10 planes from the Pentagon’s request for 43 F-35s as Congress works to finish a defense budget for the fiscal year that began Oct. 1.

Lockheed is focused on getting the JSF “into the hands of U.S. and allied pilots as quickly and cost-effectively as possible,” Larry Lawson, the company’s F-35 program manager, said in a statement.

The F-35 program has about 900 suppliers in 45 states, Lockheed Martin said.

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Lockheed Martin Corp. received a fourth production contract for 31 F-35 Joint Strike Fighter jets valued at $3.48 billion as the Pentagon s most expensive weapons program faces new questions over costs and delays. Lockheed will build 16 planes for the U.S. Marine Corps...
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2010-05-21
Sunday, 21 Nov 2010 06:05 PM
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