Steady F-35 Price Reductions Likely at an End
The next three lots of F-35 production—now being negotiated—likely won’t see much, if any, lowering of unit prices, Lockheed Martin aeronautics vice president Gregory M. Ulmer said Feb. 19.
A reduction in units being procured and an increase in capability of the aircraft will make it tough to keep the price from rising, he said.
“If you look at the next three lots, there’s going to be quite a bit of pressure, I would say, keeping the cost neutral,” Ulmer told journalists on a telecon press conference ahead of
AFA’s virtual Aerospace Warfare Symposium Feb. 24-26.
There’s “a significant quantity reduction in the next three years … on the order of 100 aircraft,” he said, so there will be fewer aircraft across which to spread overhead costs.
In the
Lot 12, 13, and 14 deal, announced in October 2019, there were 478 aircraft, and Lockheed’s unit price for the F-35A model fell below $80 million apiece for the first time. The Lot 12-14 contract reduced F-35 unit prices nearly 13 percent over the previous lots, and marked the sixth successive year of unit price reductions.
“We also know we’re going to put Tech Refresh 3 [upgraded software, improved core processor, new cockpit display] and new capabilities on the aircraft” in Lots 15-17, Ulmer said. Given all that, “We’re working to keep a cost-neutral position” for the next production lots.
The Joint Program Office reported in January that its contracting strategy for Lots 15-17 will be to negotiate a “base year” contract for Lot 15, with two single-year options in Lots 16 and 17.
The F-35 still has not been declared ready for full-rate production; that status has been repeatedly delayed while the Pentagon integrates the aircraft with the Joint Simulation Environment, a Pentagon wargaming system that assesses the right numbers of various platforms for various combat scenarios.
Declaring the F-35 ready for full-rate production will make it possible for a multi-year contract of five to seven years, Ulmer said, noting that partners are already taking advantage of block buy quantities to reduce risk. That arrangement would enable contractors and subs to make better deals for materials and labor, which could hold prices down, he said [emphasis added]...
Unit prices aren't likely to decrease much, if at all, in the next three lots of F-35 production—now being negotiated, says Lockheed Martin.
www.airforcemag.com
