New F-35 Sustainment Deal Creates Path To Lockheed Multi-Year PBL Contract

WASHINGTON: The Pentagon has granted a new F-35 sustainment contract with Lockheed Martin, one which the F-35 Joint Program Office says lays the groundwork to move towards a performance-based logistics (PBL) agreement with the world’s largest defense company.

The agreement covers fiscal year 2021, with options for 2022 and 2023. Should all the options be picked up, the contract will have a $6.6 billion price tag, according to a Defense Department press release. Cost per flight hour for the global fleet should drop by 8% over that three-year period, from $36,100 in 2020 to $33,400 in 2023; the cost per flight hour of the F-35A, the most common of the three F-35 variants, will drop from $33,600 to $30,000 during that time period.

“Working together with our Industry Partner, the F-35 Joint Program Office team negotiated aggressive cost savings and performance targets that will benefit the global F-35 sustainment enterprise, and all F-35 customers,” Lt. Gen. Eric Fick, program executive officer of the F-35 Joint Program Office, said in a statement. “The JPO remains committed to working with industry partners and F-35 stakeholders to deliver the capabilities our warfighters require at a cost our taxpayers can afford. This ’21-23 sustainment contract agreement is a positive step in securing affordable lifecycle costs for our customers.”

The F-35 statement specifically states that this agreement “lays the groundwork for a transition to a supply support and demand reduction performance based logistics (PBL) contract in the future.” PBLs are contracts that commit suppliers to delivering the reliability and availability of a system at certain agreed-to levels, over a several year period.

Lockheed has said doing an F-35 sustainment PBL will save significant money for the government, but the department has been skittish over concerns that the savings would not come as promised — while getting locked into a multi-year deal, as opposed to annual agreements that has been the norm.

The path to a PBL has been rocky. Lockheed first dropped an attempt to get a PBL signed on the desk of then-acquisition czar Ellen Lord in 2019, but it never came to fruition. Then in February, Lockheed offered another proposal which gained more traction. Fick, speaking in April, said the initial proposal faced “broad pushback” within DoD, but did start conversations. The goal of an eventual PBL, he added, is to avoid being “trapped into a mandate to sign a PBL contract that was a bad deal” before really understanding future needs.

However, there may be friction from another direction: Capitol Hill. The House Armed Services Committee’s defense authorization bill contains language that requires Secretary of Defense Lloyd Austin to submit a report, no later than March 1, 2022, on sustainability costs before the F-35 Joint Program Office can move to a PBL.

That report would require a “detailed description and explanation of, and the actual cost data related to, sustainment costs for the F-35 aircraft program, including an identification and assessment of cost elements attributable to the Federal Government or to contractors (disaggregated by the entity responsible for each portion of the cost element, including at the prime contractor and major subcontractor levels) with respect to such sustainment costs.”

Whether that language survives the full budget process remains to be seen, but after years of major sustainment cost overruns, it seems likely Lockheed will have to deliver over the next three years if it wants to see its long-term PBL come to life.