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Lockheed grows closer to F-35 block buy deal with US, international customers

June 19, 2017 (Photo Credit: Thinh Nguyen/Lockheed Martin)
LE BOURGET, France — Lockheed Martin is hammering out the details on a F-35 block buy proposal that could shave $2 billion off the total cost of the purchase, the company’s F-35 program manager said.

The deal, which could be worth anywhere from $35 billion to $40 billion, would include about 440 aircraft in low-rate production lots 12, 13 and 14, Jeff Babione, executive vice president and general manager, said Monday at the Paris Air Show. The F-35 joint program office has said the United States would pursue an economic order quantity, or EOQ, agreement — which would allow the U.S. military to buy spare parts over multiple years, but not entire aircraft — instead of a block buy.

Eleven countries, including the United States, are interested in participating and are nearing a decision, Reuters reported Monday morning. The average price of an A-model would drop to an estimated $85 million as a result.

A block buy deal would basically double the total number of F-35s under contract and allow the company to be more efficient in ordering from its suppliers, Babione said during a briefing with reporters. He also acknowledged that the package would include more than just planes, and that he expected a dramatic reduction in price per unit if the deal goes through.

“It’s more than just airplanes. You get the spares; you get training. There will be a lot of things that go with that contract, but it will be in that scale,” he said. “This supports the ramp of staff that we have been talking about for some time, growing from about 150,000 worldwide to closer to 200,000.”

Click here to get full coverage from the Paris Air Show.

The block buy idea has been met with some skepticism. In April, the Government Accountability Office cautioned lawmakers about a potential EOQ agreement, saying that it would be premature to approve it as final terms between Lockheed and the government had not been finalized. Project on Government Oversight, a watchdog organization, also condemned a possible buy on the grounds that the F-35 program was not stable enough to meet the criteria for EOQ approval in statute.

Arizona Republican John McCain, who heads the Senate Armed Services Committee, has also been a harsh critic.

However, Lockheed may have found a powerful ally in Rep. Kay Granger, a Republican and head of the House Appropriations Defense Subcommittee, who represents the Fort Worth, Texas-area, where F-35s are produced. Babione noted that he had not spoken to Granger about the issue.

However, “I have spoken to her staff, and they seem to be very, very supportive of it,” he said. “Again, if you’re going to buy the airplanes, why wouldn’t you put in a construct or an angle to produce and offer those airplanes at the lowest possible price? So we’re encouraged by the support, and I think it’s something that will go forward.”
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