DoD Weighs More ‘Organic’ F-35 Maintenance; Bartering With Lockheed

UPDATED: To include response from JPO on ODIN status. WASHINGTON: DoD is considering how the services might take over more of the F-35 Joint Strike Fighter’s maintenance chores from Lockheed Martin in order to reduce costs.

The study of future sustainment options is one of a number of efforts by DoD’s F-35 Joint Program Office (JPO), prime contractor Lockheed Martin and engine-maker Pratt & Whitney to get a handle of the program’s myriad issues. These range the jet’s sky high operating costs, to chronic spare parts shortages, to its deeply-troubled ALIS maintenance software, to a potential shortfall of F135 engines, to Block 4 software delays.

DoD expects to complete its “business case assessment” —  which will “help the services to determine what our long-term sustainment strategy needs to be for the enterprise” — by summer, Lt. Gen. Eric Fick, JPO director, told lawmakers on Thursday. That analysis will show DoD whether it is more cost effective to stick the current maintenance approach, one that relies heavily on Lockheed Martin, or move to “more organic” maintenance by the three services themselves, he said. The outcomes of the study will then form the basis of any future long-term sustainment contract with Lockheed Martin.

Currently, the JPO and Lockheed Martin are negotiating a three-year contract — based on annual options covering fiscal 2021, 2022 and 2023 — for upkeep of the aircraft, Fick said. That agreement, he explained, would serve as a “backstop” as DoD figures out “the tenants of a supply support and demand reduction performance-based logistics contract.”

Fick told the joint hearing of the House Armed Service’s subcommittees on readiness and tactical air that he had hoped to announce a “handshake agreement” during his testimony, but that informal agreement could not be reached in time.

Fick faced an often skeptical audience during the marathon hearing. In particular, key Democrats sent warning shots over the program’s bow, calling out the F-35 program’s multiple failures and the jet’s ginormous life-cycle costs as unacceptable.

While we at Breaking D have seen this HASC movie before, analysts say this time the F-35 may really, really be in trouble.

“We’ve always been bullish on the program’s prospects, but admit we’re more worried than we have been in a long time,” wrote Roman Schweizer of Cowen Washington Research Group in an email bulletin today. “In the short term, Congress may limit the program until Block 4 tech issues get fixed and O&M costs come down. In the long term, longer range aircraft (such as Northrop Grumman’s B-21) or new fighters (Next Gen Air Dominance or unmanned combat air vehicles) may siphon funding.”

Data Rights and PBLs

Maintenance issues are driving much of the F-35’s sky-high sustainment costs, said Diana  Maurer, who heads up readiness studies for the Government Accountability Office. The watchdog agency projected F-35 sustainment to total some $1.2 trillion over the fleet’s 66-year life time — costs that have crept steadily upward since the 2012 baseline. That sum would dwarf the up-front cost of R&D and procurement, bringing total life-cycle costs for the program to $1.6 trillion.

“I know that there are discussions within OSD and other parts of the department now to bring more of the sustainment of the F-35 ‘organic’ — into government — and take some of the responsibilities of the contractor,” Maurer said.

As Fick explained, the original F-35 upkeep agreement put Lockheed largely in charge and possessing most of the rights to maintenance-related data.

“The initial philosophy of the program, which was a total system performance responsibility effort led completely by Lockheed Martin, so, there are a lot of things that we didn’t ask for …. that perhaps in a program that had started in a different, way we would have asked for, and taken delivery of those pieces of data,” he said.

Fick went on to note that back in 2019, Lockheed Martin had “dropped a white paper” on the desk of then-DoD acquisition czar Ellen Lord, defining “a tip-to-tail performance based logistics (PBL) contract approach that they wanted to employ beginning in 2021.”

The company argued at the time that the multiyear PBL proposal could save DoD a bucket of money, pushing maintenance costs down by 16% per year. But Lord apparently didn’t buy the claims. In February, Lockheed Martin offered a slimmed down version of proposal on the table.

Fick explained that while Lockheed Martin’s original PBL proposal faced “broad pushback” within DoD, leadership decided to nonetheless use it as a jumping off point for further negotiations. The idea, he said, was “to assess what a solution might be that would be acceptable to the services, acceptable to Lockheed Martin.”

Thus, he went on, the 2021-2023 interim contracts would set cost targets aimed at getting to DoD’s longstanding goal of paying only $25,000 per flying hour by 2025. While Fick would not go into details citing the ongoing negotiations, he did say that the interim cost targets would form the basis for a possible future PBL.

What DoD did not want to do, Fick said, was “to get trapped into a mandate to sign a PBL contract that was a bad deal” before really understanding what parameters it needs to set for the future.

Indeed, Maurer laid much of the blame for the F-35 program’s litany of woe around sustainment on DoD’s head for signing the original contracts without having truly understood what was required.

“This is a government-driven program, so a lot of the problems that we’re hearing about today in terms of sustainment are really rooted in the program’s inability to focus on sustainment when it should have,” she told lawmakers. DoD should have made decisions about data rights and how to manage the supply chain 10 or 15 years ago, she stressed. It did not.

“And so, with a high degree of concurrency in the program, we’re now having to dig ourselves out of a very deep hole that should never have been created in the first place,” she chided.

The issue of data rights in particular has bedeviled the F-35 program almost from the get go on a number of fronts. It affects the services ability to obtain spare faster parts because of vendor lock in the parts supply chain and stymying DoD’s efforts to get a handle on the Lockheed Martin’s bug-ridden proprietary maintenance software called ALIS (Autonomic Logistics Information System.)

Spares and Engines Shortfalls

Maurer said that F-35 units GAO spoke to for its latest report, released on Thursday, complained that “supply chain challenges continue to drag down readiness.”

She said that while DoD pays contractors “to provide enough spare parts to ensure that planes can fly 85% of the time” that there “clearly are not enough spares to go around.” And while some of this problem over the last year can be blamed on the global COVID-19 pandemic, many of the problems are systemic — such DoD and Lockheed’s seeming inability to manage the international supply chain, where for example easily avoidable problems such as failing to plan in time for shipments to pass through customs continue to crop up.

GAO also found that crews “struggle to maintain the aircraft because they don’t have access to the necessary technical data,” she added.

While the F-35 has not been meeting its spare parts goals, Maurer said it is one area where things seem to be looking up: “Fewer aircraft are being grounded for lack of spare parts, an average repair times have decreased.”

That said, the program faces a potential shortfall of F135 engines in the future, in part due to a lack of spares.

Matthew Bromberg, president of P&W Military Engines, told the committee part of the problem is simply that DoD and the company didn’t bake enough leeway into contracting for spares.

“This program was constructed with 12% spare engines and modules. That’s about half of what all my other engine programs were constructed [with] — very, very lean,” he told lawmakers. “We recommend that we plus up that number of spares engines, at least for a period of time, as we get up the learning curve.”

But it isn’t just spares troubling the engine program. Maurer said GAO has found “units are pulling engines off planes more frequently than expected. And it is taking 70% longer than planned to repair key engine components. As a result, there’s a repair backlog.” If the current trend is unaddressed, she added, “by 2024, one in eight F-35s will be grounded for lack of engines, growing to over 40% by 2030.”

Brig. Gen. David Abba, who leads the Air Force’s F-35 integration office, said the lack of engines already is affecting fleet readiness. He told lawmakers that as of April 21, a total of 21 Air Force F-35As were “grounded without a serviceable engine — 15 of which are otherwise flyable.”

Then, There Is ALIS

Despite the long-running efforts of both DoD and Lockheed Martin to fix it, GAO found that ALIS “continues to be difficult to use and prone to error, creating a culture of workarounds that undermines trust in that vital system,” Maurer said.

Lockheed Martin has been working for years, often on its own dime, to patch up faults in ALIS’s software system for tagging parts (known as an Electronic Equipment Logbook or EEL) as ready for use — which in turn allows ALIS to track parts deliveries. (A problem that was explained in gory detail in a June 2019 audit by DoD’s Office of the Inspector General.)

Meanwhile DoD has been crafting its own software (under a program originally called Mad Hatter headed up by the Air Force’s Kessel Run software factory) for an ALIS replacement called ODIN, for Operational Integrated Data Network.

“Our intent with ODIN is not to just rebrand ALIS,” Fick told the HASC hearing. “ODIN is all about a new hardware baseline, a new integrated data environment, and new applications and user interfaces that make it a better system from the ground up, that we own, in its entirety.” DoD is investing $471 million over the next five years “into the combination of ALIS and Odin, as we move from one into the other,” he said.

At the same time, he said, DoD over the past year found that its initial estimates about the time it would take to transition to ODIN were too rosy, he said. Thus, JPO is now reassessing its plans for ODIN based on re-looking what has to be done, as well as to factor in a budget cut in 2021.

“We need to continue to improve the functionality of ALIS in the near term, as we ensure that the ODIN structure that we put into place, from a hardware perspective, from a data environment perspective, and from a software perspective, is what the users need,” Fick said.

UPDATE BEGINS. In response to our questions, a JPO spokesperson explained that none of this means the transition from ALIS to ODIN has actually been halted. “Due to the reduction in appropriated ODIN Research, Development, Test, and Evaluation funding for FY 2021, the JPO slowed the pace of – but has not stopped – development activities for both our government and industry partners,” the spokesperson said in an email.

“As Lt. Gen. Fick’s written testimony states, the JPO will continue to field and leverage the modern ODIN hardware as we mature the overarching transition strategy,” the spokesperson elaborated. “We have already procured multiple ODIN hardware kits that will begin to roll out to units later this summer.”

Further, the spokesperson explained, ‘strategic pause’ mentioned by Fick’s written testimony “refers to a review of the JPO’s overall strategy to evolve ALIS to ODIN across all elements – modern hardware, architectures, software development methods, data environments, and platforms – based on the accomplishments and lessons learned in 2020.” UPDATE ENDS.

Mission Capability Rates — A Sliver Of Light

Despite the litany of woe, Fick stressed during the hearing that progress is being made by the program — in particular on mission readiness rates.

He said that both mission capable rates (MC) and fully mission capable rates (FMC) have gotten better. (MC means what percentage of aircraft on the flightline can perform at least one of the F-35’s various missions, Fick explained, and FMC means what percentage can undertake all the missions their unit has assigned them.)

“We have been seeing increases both MC and FMC increases between 2019 and 2020. And they’re not insignificant,” Fick said. “Across the fleet, and we saw the average in 2019 go from 63.2% from an MC perspective to 68.5%.” Fleet FMC, he added, has gone from 33.5% to just shy of 37% — a number that he called “still unsatisfying,” but nonetheless one that is “moving in the right direction.”

Fick elaborated that those cross-fleet numbers hide a vast disparity among the services.

The Air Force is seeing the best readiness numbers, he said, with an MC of above 73%, and an FMC of above 54%. Those represent “10% jumps over last year.”

On the other hand, the Navy and the Marine Corps readiness rates are pretty dismal. “As a matter of fact, I think we step backwards just a little bit with the Navy this past year — from just over 59 to just under 59 percent from an MC perspective,” Fick said.

Fick and Lockheed Martin’s Greg Ulmer both reassured lawmakers that sustainment costs also are going in the right direction (i.e., down). Between 2019 and 2020, the F-35A’s cost per flying hour decreased by 10%, Fick said, from $37,000 per flight hour to $33,300 per flight hour in base year 2012 dollars.

Ulmer, Lockheed Martin’s executive vice president for aeronautics, said the firm “is applying the full weight of our talent and ingenuity to root out F-35 sustainment costs. In the last five years, we have invested nearly $400 million to drive [down] sustainment cost in production and increase readiness performance across the fleet.”