Pentagon Seeks To Reduce Subcontractor Costs for F-35

The Pentagon is looking to lower subcontractor costs as it attempts to bring down the price tag of the Lockheed Martin F-35 Lightning II, the Pentagon's director of defense pricing said.

THE PENTAGON'S DIRECTOR of defense pricing, Shay Assad, said the agency is trying to lower subcontractor costs for the F-35 Lightning II program. (LOCKHEED MARTIN)

"What we've learned is that a lot of the money that we're spending is at the subcontract level," Shay Assad told reporters July breakfast with reporters in Washington.

"We're following money," Assad said. "We want to make sure we have a complete understanding of what we think a fair and reasonable subcontract price should be, and we do expect Lockheed Martin to develop their own position."

The U.S. Defense Department expects to have a better picture of the Joint Strike Fighter (JSF) program costs in the fall. Prior estimates have pegged the cost of the overall JSF program - which includes more than 2,400 U.S. jets and an expected 700-plus international order - at more than $380 billion.

This comes as the Pentagon prepares to enter negotiations for the fifth batch of low-rate, initial production (LRIP) jets.

Assad said DoD officials are currently evaluating Lockheed Martin and subcontractor proposals for that batch of aircraft.

"We expect that sometime in the fall we'll commence negotiations, and if it goes according to plan, we should have a deal sometime by the end of the year," he said.

Asked if Lockheed's LRIP-5 price shows a downward trend, Assad said: "We're expecting a downward trend."

DoD is "getting a much clearer view each day" of F-35 cost projections, he said.

The Pentagon is also evaluating earned value management, which had been previously "disapproved" by the Defense Contract Management Agency, according to Assad.

"They have a path, and we're satisfied that if they stay on that path, they'll be OK," he said. "One of the problems is just the ability to accurately forecast their work."

"I think that by the end of this year, they'll be in pretty good shape in terms of having reliable projects and forecasts," Assad added.

Lockheed is getting better at determining common features across the three multiservice jets, which will be operated by the Air Force, Navy and Marine Corps, as well as allies.

The Air Force version is a conventional jet that takes off and lands on a runway, but the Navy version is build to operate off aircraft carriers and the Marine Corps version can launch off smaller ships or runways and land vertically.

"What we're finding is that we're getting much more precise about what is the commonality amongst these things and how should we build those common items, because that's where we'll save some money," Assad said.

The current LRIP-4 batch is the first in which all three versions of the JSF are being built at the same time.

"I would say by the end of this year, early next year, we'll have some very good insight into what the production differences are in the aircraft in terms of what they should cost," Assad said.

The Pentagon is also exploring the possibility of having Lockheed build all Air Force jets for a period, then switching to a different variant, and so on.

That review is expected to wrap up in 60 to 90 days, Assad said.