by Valerie Insinna | Defense News
(This article first appeared on July 23, 2020)
WASHINGTON — As defense spending flattens, it may be difficult for the Defense Department to further push down the unit cost of the F-35 joint strike fighter, the head of the Pentagon’s joint program office said Wednesday.
“Overall, as you’re looking to the service budgets and as you look into the service spend plans, you see that the numbers of aircraft in those years are not rising as they did in lots 10 through 14, but they’re a little bit more flat,” said F-35 program head Lt. Gen. Eric Fick during a House Oversight and Reform Committee hearing.
“Some of the flatness in the profile in those years is going to challenge our ability to continue to drive price down by tail. But we are committed to continuing to work hard with the department to establish the best value for our taxpayers and warfighters,” he said.
Since 2016, the Defense Department had pushed Lockheed Martin to lower the unit cost for an F-35A conventional takeoff and landing model — which is being purchased by the U.S. Air Force and most international customers — to $80 million per plane by Lot 14.
When the department finalized a deal for Lots 12-14 in October, it announced that it would reach its unit cost goal a year early in Lot 13, with those jets set to roll off the production line in 2021. The price per F-35A is set to lower from $82.4 million in Lot 12 to $79.2 million in Lot 13 down to $77.9 million in Lot 14.
“We’re currently entering negotiations for the Lots 15 through 17 contracts,” Fick said during the hearing Wednesday.
Over the course of the program, the number of F-35s produced per year has steadily risen, allowing for economies of scale that drive down the cost of each aircraft. Lockheed delivered 61 F-35s in 2017, 91 in 2018 and 134 in 2019. The company was on track to deliver 141 F-35s this year, but the COVID-19 pandemic forced it to scale back its delivery projection by about 24 jets.
Lockheed plans to continue ramping production of the jet over the next several years and will hit a high of about 165 F-35s manufactured in a single year, said Greg Ulmer, Lockheed’s vice president and general manager for the F-35 program. After that, he told lawmakers, there will be “a slight decline” in the next three lots, which will average about 155 aircraft per batch.
Taken together, Fick and Ulmer’s comments could portend that the services never actually reach the previously projected procurement goals. In 2016, the U.S. Air Force dropped its planned buy rate from 80 to 60 jets per year. And although the service procured 62 F-35As in fiscal year 2020 thanks to additional funds from Congress, it has never requested 60 F-35s in its budget and has no plans to do so through FY25.
Meanwhile, the Marine Corps has signaled that it could cut its planned F-35 program of record, which currently stands at 353 F-35B short takeoff and vertical landing models and 67 F-35C carrier variants.
“Right now, the program of record plows ahead as it is,” Marine Corps Commandant Gen. David Berger said in April. “But I’m signaling to the industry, we have to be prepared to adjust as the operating environment adjusts.”
Financial analysts have raised concerns that economic pressures caused by the pandemic and the possibility of former Vice President Joe Biden winning the presidency could portend flat or even decreased defense budgets. But during an earnings call on Tuesday, Lockheed chief executive James Taiclet said that the company remains “incredibly well positioned” even if there is a downturn in spending.
“I think the breadth of the company’s portfolio of products, services, and domains that we operate in is going to position us well even at a downturn, frankly,” Taiclet said. “The threats aren’t going away. Defense is going to have to be supported, I think in any reasonable person’s view going forward, especially if those people are in positions of responsibility, no matter what party they may come from.”