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F-35: DoD Forces Lockheed To Accept Its Price For LRIP 9

Posted by Colin Clark on


Workers can be seen on the moving line and forward fuselage assembly areas for the F-35 Joint Strike Fighter at Lockheed Martin Corp's factory located in Fort Worth, Texas in this October 13, 2011 handout photo provided by Lockheed Martin. Lockheed Martin Corp on February 25, 2013 said there was no evidence that a lithium-ion battery contributed to a Feb. 14 incident that caused smoke in the cockpit of an F-35 test plane. Lockheed spokesman Michael Rein said initial reviews indicated a potential failure in the plane's cooling system, which had been removed from the aircraft for further study. Picture taken October 13, 2011. REUTERS/Lockheed Martin/Randy A. Crites/Handout (UNITED STATES - Tags: MILITARY) ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS PICTURE IS DISTRIBUTED EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS - RTR3EAKJ

F-35 production line

WASHINGTON: In an extraordinary action, the F-35 Joint Program Office decided 14 or 18 months of negotiations was enough and has issued a “unilateral contract” for the latest Low Rate Initial Production contract to defense giant Lockheed Martin.

In simple terms, the Pentagon got sick and tired of talking with Lockheed and told them, here’s how much we’re willing to pay you. Take it or leave it. All terms had been agreed to by both sides except one — the price. This may well be the largest unilateral contract ever issued by the United States government. That’s what I’ve heard from two well informed sources, but we don’t have anything definitive yet.

“The definitized contract for LRIP 9 announced today was not a mutually agreed upon contract, it was a unilateral contract action, which obligates us to perform under standard terms and conditions, and previously agreed-to items,” Lockheed’s F-35 spokesman Mike Rein said in an emailed statement. “We are disappointed with the decision by the Government to issue a unilateral contract action on the F-35 LRIP 9 contract.”

Rein said the company “has negotiated in good faith consistent with our commitment to reach a fair and reasonable agreement on this critical program.”

If you want to get some idea as to how far apart the two sides are, the two sides couldn’t even agree on how many months they had been negotiating. JPO spokesman Joe DellaVedova said they’d been talking for only 14 months, compared to Lockheed’s 18-month claim.

Next step? My understanding is that Lockheed either accepts the government contract for 57 F-35s for roughly $6.1 billion or it goes to court to protest the government’s action.

Or, in corporate speak: “We will continue to execute on the F-35 program and we will evaluate our options and path forward.”

Lt. Gen Chris Bogdan, head of the JPO, had indicated some frustration with the slow pace of contract discussions but also said he thought they’d have a deal by the end of the year at the Air Force association’s annual conference in September.

DellaVedova said the latest contract equated to a 3.7% average reduction in price from LRIP 8 in December 2014.

What do you think?