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DoD Acquisition Chief: Pentagon, Lockheed Still Working On F-35 Deal

Jul. 16, 2012 - 08:01PM   |   Last Updated: Jul. 17, 2012 - 04:59PM  |  
By MARCUS WEISGERBER   |   Comments
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The U.S. Defense Department and Lockheed Martin are still trying to iron out a deal for 32 F-35 Joint Strike Fighter aircraft, the Pentagon’s top weapons buyer said.

Frank Kendall, the undersecretary of defense for acquisition, technology and logistics, said he is “hopeful that we’re in the endgame” of the negotiations, which have been under way since last year.

While he refused to discuss the details of the talks, he said the two sides are getting closer to an agreement.

One reason for such a lengthy negotiation is the use of new Pentagon pricing data.

DoD officials, have developed a so-called “should-cost” estimate made up of data from the previous four batches of F-35s purchases. These figures have been used to develop a “bottoms-up cost estimate based on that previous history,” Kendall said.

“We started negotiations on the government side with a very well-documented set of costs, called the should-cost, and then we were able to compare that to the bid that we received, item-by-item, line-by-line,” Kendall said during a July 16 meeting with a small group of reporters in his Pentagon office. “Going through and trying to resolve the differences has been the process that has taken so long.”

After these negotiations conclude, “we’ll be in a very good place to go ahead and negotiate for future lots,” he said.

Vice Adm. David Venlet, the F-35 program manager, said in March that the Pentagon hoped to strike a better deal with Lockheed over prior order despite plans to purchase 179 fewer jets over the next five years.

Michael Rein, a Lockheed Martin F-35 spokesman, declined to comment on the negotiations.

“Lockheed Martin does not discuss specific details of contract proposals,” he said in an email. “We look forward to our continual engagement with the government on these negotiations to reach an agreement to provide the F-35 to our DoD customers at an affordable price.”

Some Sequestration Details

The Pentagon believes that sequestration — mandatory across-the-board spending cuts set to go into effect in January — will not impact every acquisition contract.

Kendall said the sequestration would apply to funding that is not yet obligated.

“The reduction assigned to acquisition programs is based on the unobligated funding at the time sequestration goes into effect,” he said. “In general, this reduction will be applied to funds not yet on contract.

“A small subset of acquisition programs — some R&D [research-and-development] contracts, incrementally funded ships, multiyear contracts — are funded year by year, so they are on contract, but not all the funding is obligated up front,” he added.

Kendall, like many other DoD leaders, called on Congress develop a plan to advert the defense spending cuts, which are expected to total nearly $500 billion over the next decade.

“The investments accounts are going to be hit hard,” Kendall said, referring to the research-and-development and procurement budgets.

“What we’re trying to send is a very, very strong message that sequestration is just an unacceptable outcome, it’s completely unnecessary,” he said. “There’s no reason why it should occur and Congress simply has to act to avoid it and we’re hopeful that they will.”

Pentagon officials say will not preparing for sequestration and will not until the White House Office of Management and Budgets provides them planning instructions.

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