WASHINGTON — The Defense Department could be ready to jump into a performance-based logistics contract with Lockheed Martin to sustain the F-35 as soon as its recently inked agreement expires in fiscal 2023, the Pentagon’s program executive said Wednesday.
But it will come with strings attached — namely the handover of critical technical data that will make it easier for the department to do the maintenance itself if Lockheed fails to deliver on its promises.
“We’re using really the incentive of the PBL to help us get decent pricing on the tech data required [for the services to do more sustainment organically], so that at the end of that PBL, the services and the department have an option for moving forward,” Lt. Gen. Eric Fick, who leads the Pentagon’s F-35 joint program office, told reporters during a roundtable.
“If it comes to pass that Lockheed really kills it and we end up with great performance, then why would we not sign up for another PBL?” he said. “But if they’re not — if the services and the department and the partners are unsatisfied with the performance — now we have an option [to do sustainment work ourselves], because we have the data that allows us to do something different.”
Earlier this week, the Defense Department awarded Lockheed a contract for F-35 sustainment for FY21, with options for an additional two years that would bring the value of the deal to $6.6 billion.
That agreement will lay the groundwork for a more expansive, five-year performance-based logistics contract for “supply chain management and demand reduction,” Fick said. Put in basic terms, the agreement is meant to ensure F-35 parts can be repaired and made available to the flight line quickly.
For the aspects of sustainment not covered by the PBL, the Pentagon would continue to negotiate annual contracts with the company, he said.
Lockheed has been pursuing a performance-based logistics contract since 2019, when it proposed a fixed-price agreement that would keep the F-35 fleet at an 80 percent mission capable rate. Pentagon leaders were wary of the offer and rejected it, but undertook a study on whether a more limited PBL could provide value.
Ultimately, Fick said, the department opted to negotiate a normal annual sustainment contract for FY21 and signed a memorandum of agreement with Lockheed in spring 2020 that laid out the conditions necessary to enter a PBL.
“We knew as a department, that we did not want to be trapped into a bad deal, for the schedule to be weaponized and for us to have to sign a bad PBL,” Fick said.
Most importantly, the memorandum also included a mandate: Concurrent with the signing of a PBL, Lockheed must agree to a contract to deliver technical data that would allow the U.S. military to take on more supply chain management itself.
The department specifically wants to gain the “provisioning and cataloguing data” that would allow a manager at a depot to order the components and materiel needed for maintaining the F-35, not the design data that is more closely guarded by the company, Fick said.
Congress is wary of a PBL and has advocated for the Defense Department to introduce greater competition for F-35 sustainment, which is almost completely carried out by the prime contractors for the air vehicle and engine — Lockheed Martin and Pratt & Whitney, respectively.
The House Armed Services Committee’s proposed version of the FY22 National Defense Authorization Act directs the Defense Department to provide a briefing on how it could create a “competitive sustainment environment” for the F-35, which the committee believes could “reduce lifecycle costs, increase efficiency, and drive innovation while strengthening the overall viability of the program.”
The bill also prohibits starting a performance-based logistics contact for the F-35 unless the defense secretary certifies that the program meets affordability targets and that sustainment costs would continue to decrease.
Fick said he is generally supportive of increasing competition in the F-35 program.
“[Competition] drives affordability, it drives responsiveness, it drives a focus that the sole-source environment doesn’t,” he said.
Pressed on whether the department would consider competing F-35 sustainment if Lockheed does not perform well on a PBL, Fick said that isn’t the intent, but acknowledged other companies could probably pick up portions of the work.
“Lockheed Martin, as our prime contractor, owns a lot of the intellectual property associated with the system,” he said. “We have access to pieces of it and will continue to use it, but our ability to take and pass that to another so that they might use it is in some ways limited.”
Valerie Insinna was Defense News' air warfare reporter. Beforehand, she worked the Navy and 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.