F-35 price to fall with new Pentagon deal

By Kang Seung-woo

The U.S. Department of Defense reached an agreement in principle Tuesday with Lockheed Martin to purchase 71 F-35 Lightning II at a lower price.

The agreement includes the purchase of 36 jets in the sixth low-rate initial production (LRIP-6) lot and 35 in the seventh. The contracting effort spanned six months from proposal to settlement.

A decrease in F-35 unit costs, coupled with negotiating lower prices on a number of other smaller contracts, will allow the Department to purchase all the aircraft originally planned, including those that were in jeopardy of being cut due to sequestration budget impacts.

Cost details will be released once both contracts are finalized; however, in general, the unit prices for all three variants of the U.S. air vehicles are roughly 4 percent lower than the previous contract. LRIP-7 air vehicle prices will show an additional 4 percent reduction. The LRIP-7 price represents about an 8 percent reduction from the LRIP-5 contract signed in December 2012.

“These two contracts represent a fair deal that is beneficial to the government and Lockheed Martin,” said Lt. Gen. Chris Bogdan, F-35 Program Executive Officer.

“Improving affordability is critical to the success of this program, and by working together we were able to negotiate a lower cost F-35. There is still work to be done, but these agreements are proof the cost arrow is moving in the right direction. We will continue to work with industry to identify areas for savings in future production contracts.”

The new contracts will also include the first F-35s for Australia, Italy, Norway, and the fourth F-35 for the United Kingdom. In addition to procuring the air vehicles, these contracts also fund manufacturing-support equipment and ancillary mission equipment.