Lockheed Martin Sees Hill Support For F-35 PBL

CORRECTION: To cost reduction percentages. WASHINGTON: Lockheed Martin is projecting another 40 percent drop in its portion of the F-35’s costs per flying hour by 2025, a trend that is expected to continue, company officials said today. Moreover, they argue, overall costs could be even further reduced should DoD sign a company-proposed multi-year performance-based logistics (PBL) contract.

“Our costs per flying hour have been significantly reduced over time,” Mike Miles, of the firm’s F-35 Logistics Solutions unit, told reporters in a briefing today. “Between 2014 and now is a 44 percent reduction in the Lockheed Martin cost, and we project another 40 percent reduction up to 2025.” CORRECTION ENDS.

Lockheed Martin, as prime contractor for the F-35 Joint Strike Fighter, is responsible for about 39 percent of the stealth fighter’s sustainment costs, explained spokesperson Brett Ashworth. DoD — primarily the Air Force — is responsible for approximately 50 percent; and engine maker Pratt & Whitney the remaining 11 percent.

The stealth fighter’s cost per flying hour is about $33,000, Lt. Gen. Eric Fick, head of the DoD’s F-35 Joint Program Office (JPO) told lawmakers in April. Lockheed Martin officials are adamant that they are on track to hit the program’s current goal of pushing that price tag down to $25,000 per flying hour by 2025 (in 2012 dollars set as a budgeting baseline). However, company officials today demurred to offer exact dollar figures for any given year.

Since 2019, Lockheed Martin has been pushing DoD to change its current year-by-year contracting methodology for JSF sustainment by switching to a firm-fixed price, multi-year PBL. Company officials said the preferred PBL contract duration would be five years.

In 2019, the JPO and Lockheed Martin wrapped up a three-year pilot PBL arrangement, noted Miles, which the company had assumed would lead to a formal contract. Miles, who was an Air Force officer involved at the time, said the pilot effort “proved all the [good] results that we thought would happen.”

The company argues a PBL would substantially reduce sustainment costs, improve the flow of parts and increase the aircraft’s mission capability rates. Indeed, officials said today, Lockheed Martin has seen success in the limited use the company has made with suppliers.

DoD, however, has been reluctant to sign on the dotted line, with officials skittish about getting locked in to a long-term arrangement with one vendor.

“I think that there’s a misunderstanding of what will change from a government involvement standpoint,” Miles said. “There’s a perception out there that Lockheed’s going to take everything, and nobody’s gonna be able to get in to support of the F-35. That’s not the case.”

“I want to emphasize that there’s no change in relationship with our depots and the government piece of that,” he went on. “So it’s not Lockheed Martin saying: ‘we’re gonna do more.’ It’s doing the things we’re doing today but smarter and being more efficient; so we can have PBLs with our vendors; we can project performance; we can assume the risk versus leaving the risk with the government; and we can deliver outcomes based off the customer demands.”

CLARIFICATION BEGINS. Fick told lawmakers in April that the JPO is currently studying the “business case” for a “skinny” version of the company’s earlier PBL proposal, while negotiating an interim contract through 2023. A decision is likely to be made this summer on next steps. But Lockheed Martin officials today were quick to explain that current negotiations are addressing annualized sustainment contracts, not a PBL, and they obviously would like to see negotiations on a PBL begin as soon as possible. CLARIFICATION ENDS.

Miles said that, despite ongoing DoD reluctance, Congress has been “very supportive” of the PBL idea. Indeed, he said, staff has made it clear to the company that a legislative authorization for DoD to sign such a contract is not needed — it is simply up to the JPO and Lockheed Martin to agree to a deal.

And Lockheed Martin may find a friendlier ear for its efforts when the nominee for Air Force Secretary Frank Kendall is approved by the Senate (as expected.) Not only did Kendall tell lawmakers in his Senate hearing last week that in his view buying more F-35s, not fewer, is a way to push down sustainment costs, but also in his previous job as Pentagon acquisition czar Kendall was a big promoter of PBLs. 

The enormous costs of keeping F-35s in the air is the central factor putting the fifth-generation fighter in the budget crosshairs within DoD — and even in Congress, which has long supported the plane’s troubled development. Air Force Chief of Staff Gen. CQ Brown earlier this year hinted that the service may have to pare its total planned buy of 1,763 aircraft as it looks to reshape the fighter fleet for the future.

DoD asked for some $12 billion in its 2022 budget request to buy 85 F-35 JSF aircraft; with the Air Force accounting for the bulk of the procurement plan with 48 jets at $4.5 billion. However, the Air Force broke with tradition by failing to include extra jets in its annual “unfunded priorities” wish list of equipment that didn’t make the budget chop inside DoD, reports colleague Valerie Insinna. (For example, the Air Force asked for 12 in its 2021 unfunded priorities list, which Congress happily provided.)

But this year, even prior to the budget drop last Friday, some senior House Democrats had warned DoD that it wouldn’t be getting any extra even if it did ask — of course prompting the staunch F-35 supporters among their ranks to fight back. That debate is certain to play out during upcoming House Armed Services Committee hearings, as well as those on the other side of Capitol Hill.