EXCLUSIVE: With DoD ‘pausing’ negotiations, new F-35 logistics deal in doubt for 2024

WASHINGTON — The Pentagon and Lockheed Martin have stalled on reaching an agreement for a new sustainment approach for the F-35 Joint Strike Fighter, prompting military officials to instead explore options for continuing the jet’s traditional maintenance structure “at least” through the end of next year, a top defense official tells Breaking Defense.

In an interview at his office in the Pentagon earlier this month, Assistant Secretary of Defense for Sustainment Christopher Lowman said his team has been working with Lockheed to certify a performance-based logistics (PBL) agreement, but a congressional mandate that the agreement either increase readiness or decrease maintenance cost of the tri-variant fighter has proved to be a stumbling block.

“The Congress really has levied on us a hard requirement before we can award a PBL,” Lowman said, adding that “we cannot certify as of today.”

Due to the impasse, Lowman said Pentagon officials have started work on drawing up a new sustainment contract that would run “at least through the end of ‘24,” an indication it could stretch longer than that.

“And so that’s just to ensure that we have the necessary framework and support in place to sustain currently fielded F-35s and operations globally,” he said.

In a statement provided to Breaking Defense today, the Office of the Secretary of Defense said that the current proposed PBL “does not meet” the Congressional certification requirements. “Accordingly, the Department is pausing F-35 PBL negotiations with Lockheed Martin,” the statement says, adding that the Pentagon and Lockheed “have agreed to extend the FY23 annual recurring sustainment contract (FY23A) through March 2024 and are working an additional extension through June 2024.” After that, the new contract Lowman was referring to would take effect.

According to OSD, the extension will give both parties more time to negotiate while ensuring no lapses in coverage for sustainment.

A dollar figure for the extension is not immediately clear; in 2021, the Pentagon awarded Lockheed a sustainment contract worth up to $6.6 billion, which had a base year in fiscal 2021 and options through FY23.

The PBL would change how the stealth fighter is sustained: whereas Lockheed is currently paid on an ad hoc basis for parts and maintenance, a PBL, on the other hand, would tie dollar awards to performance outcomes. The proposed deal officials have been evaluating would also span five years, in contrast to existing annualized contracts.

“We continue to view Performance Based Logistics contracting as the primary way to increase part availability, readiness, and affordability for the long-term as the F-35 fleet scales. While we are disappointed with the decision, we remain committed to partnering with our customers to deliver sustainment support, enabling mission readiness and deterrence,” Lockheed said in a statement to Breaking Defense.

The decision by the Pentagon to continue the current sustainment arrangement had been largely expected, but the assumption was that it would be a short-term issue. Lockheed officials earlier this year projected confidence the PBL could get on contract before the new year, but by September, difficulties in reaching an agreement prompted executives to push that timeline out to the first quarter of next year at the earliest.

But the fact Lowman anticipates needing a traditional sustainment agreement through the entirety of 2024 suggests the issue could drag on.

The ultimate fate of the proposed PBL is itself unclear. An expansive report on F-35 sustainment published by the Government Accountability Office in September, which identified numerous issues driving the stealth fighter’s disappointing readiness rates, found that officials weren’t sure the Congressional requirements to certify the PBL could be met.   

Executives at Lockheed, however, are pushing hard to change the approach to maintaining the F-35, which is expected to cost $1.3 trillion to operate and maintain across its entire life cycle.

“I have a belief that performance-based logistics, where you’re held accountable to an outcome, drives performance,” Greg Ulmer, the head of Lockheed’s aeronautics division, told Breaking Defense during an interview at the Paris Air Show earlier this year, adding that his desire is for something longer-term than a five-year plan. 

“I am motivated to perform. I don’t want just a five-year PBL. I want a 10-year, I want a 15-year,” he added. “My motive is to have a long-term relationship with my customer that’s satisfying for them through my performance that they continue to contract with me. And I’m not sure in other approaches that that motivation toward performance on outcome is there.”