The completion of negotiations on terms for two more production lots of F-35 fighters provides fresh evidence that the program has stabilized and is making steady progress. Low-rate production Lots 6 and 7 will increase the number of F-35s delivered or under contract from 95 to 166, while reducing the unit cost of all three variants by an average of over 8% compared with current production Lot 5.
Cost reductions of that magnitude are required to position F-35 for maximum sales overseas as aging F-16s begin to retire. Prime contractor Lockheed Martin has said that if the current program of record remains on track, then it should be able to offer the Air Force version of F-35 at a cost comparable to what the latest version of an F-16 sells for today by the end of the decade. If the cost actually falls that far — which will require congressional appropriators to stick with the current program plan — then the plane’s other selling points should make it the dominant factor in the global fighter market through 2050.
One of the most encouraging aspects of the recently-completed negotiations is how little time it took for the government customer and prime contractor to come to terms. Whereas Lot 5 negotiations stretched out over 18 months of sometimes acrimonious exchanges, the latest discussions lasted a mere six months and covered two different production lots. This implies that much of the tension previously impeding the customer-contractor relationship has dissipated.
There have been numerous signs in recent months from the Joint Program Office, the Office of the Secretary of Defense, the Government Accountability Office and Congress that F-35 was making good progress. The successful conclusion of negotiations for Lots 6 and 7 provides concrete evidence that the progress is real.
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