F-35 LRIP 4 Jets 7% Over Target Cost

Photo: Lockheed Martin

Dec 2, 2011 By Amy Butler - aerospace daily and defense report

NEW YORK – Senior industry and government officials overseeing the $380 billion F-35 program say that the fourth production lot is likely to overrun its per-unit cost target by about 7%.

Vice Adm. David Venlet, the government’s F-35 program executive officer, says that prime contractor Lockheed Martin could improve on that, bringing the cost at completion closer to the target. Roughly 30% of the build is complete for the aircraft in low-rate-initial production (LRIP) lot 4, he says.

“We feel good about how we are performing on the LRIP 4 aircraft today,” Bruce Tanner, Lockheed Martin’s chief financial officer, told an audience of investors assembled at the Credit Suisse/Aviation Week 2011 Aerospace and Defense Conference here on Dec. 1. The 7% overrun expectation is “a pretty good estimate,” he said.

The unit cost targets according to the government program office are:

* $111.6 million for the F-35A conventional takeoff and landing version;

* $109.4 million for the short-takeoff-and-landing version; and * $142.9 million for the first production carrier aircraft.

Based on the contract, the government and Lockheed equally share in the cost of overruns up to 120% of the unit price target.

This overage is an improvement over earlier F-35 lot prices, which exceeded targets from 11-15%.

The government is paying $771 million in overruns to the price targets set up for LRIPs 1-3; this averages to $27.5 million per aircraft. Of that, $135 million is dedicated to “concurrency cost,” or the price of retrofitting work onto existing jets based on findings in the development program. On average, that’s about $4.86 million for the 28 aircraft in the first three lots.