Updated 9/30/2020 at 12:18 p.m. with a statement from top House Oversight and Reform Committee members.

WASHINGTON — The Defense Department and Lockheed Martin reached a handshake agreement that will require the defense giant to invest about $70.6 million to fix an ongoing problem with F-35 spare parts, one that resulted in increased government labor costs, the department announced Sept. 29.

For the past few months, Lockheed and the Defense Contracts Management Agency have been locked in a dispute over more than 15,000 F-35 spare parts sent to the U.S. military with incorrect or incomplete “electronic equipment logs” or EELs, which allow the parts to be absorbed into the F-35′s logistics system and installed on the jet.

Lockheed and the Defense Contracts Management Agency expect a final agreement to be formalized sometime within the next two weeks or so, said DCMA spokesman Matthew Montgomery, who confirmed the $70.588 million deal to Defense News.

The use of EELs — which allow the government to track the usage and lifespan of major F-35 parts — is unique to the joint strike fighter program and is meant to help inform smarter, more cost-effective maintenance and buying practices.

But when parts are delivered with inaccurate EEL information, it can take hours for military maintainers and Lockheed support personnel to track down the correct data that will allow a part to be uploaded into the system and installed in the aircraft.

Instead of paying back the government directly for the added costs associated with the EELs, Lockheed will “compensate the government with Lockheed Martin investments” that will ultimately ensure spare parts are delivered with accurate electronic logs, said Lockheed spokesman Brett Ashworth.

The $70.6 million agreement will also include some investments Lockheed has already made with its own funding to begin ameliorating the issue.

“We appreciate the partnership with the Defense Contract Management Agency and the F-35 Joint Program Office, and we remain focused on ensuring the warfighter has the support they need to employ the F-35′s game changing capabilities,” Ashworth said.

The final sum of the agreement is less than half of the $183 million sum that DCMA initially projected that the government had spent to correct wrong or incorrect EELs since 2015. It was not immediately clear why DCMA had agreed to a compensation deal worth so much less than the department’s estimated costs.

During a July hearing, lawmakers from the House Oversight and Reform Committee chastised Lockheed for its failure to deliver parts ready to fly, but Greg Ulmer, Lockheed’s vice president for the F-35 program, said then that the company should not take all of the blame for the spare parts problems.

In a Sept. 30 statement, two of the committee’s top Democrats — New York Rep. Carolyn Maloney, its chairwoman, and Massachusetts Rep. Stephen Lynch — commended the agreement.

“We applaud the Department of Defense for its efforts to hold Lockheed Martin accountable for failing to meet its F-35 contract requirements," the lawmakers said. "While we believe Lockheed should have reimbursed American taxpayers for a greater share of the funds DOD spent to address the inefficiencies uncovered by our committee’s investigation, this is a step in the right direction. We look forward to seeing the final signed agreement that codifies Lockheed Martin’s commitment to improving the F-35 program.”

About Valerie Insinna

Valerie Insinna is Defense News' air warfare reporter. She previously worked the Navy/congressional beats for Defense Daily, which followed almost three years as a staff writer for National Defense Magazine. Prior to that, she worked as an editorial assistant for the Tokyo Shimbun’s Washington bureau.

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