Lockheed F-35 Bad Deal as One Jet for All, Report Finds | Bloomberg

By Tony Capaccio

Lockheed Martin Corp.’s (LMT) F-35 jet fighter, designed by the Pentagon to serve the Air Force, Navy and Marine Corps, is likely to end up costing more than it would to build separate planes for each service, a Rand Corp. study has found.

“Under none of the plausible conditions we analyzed did” the F-35 “have a lower life-cycle cost estimate,” Rand, a nonprofit research institution, said in the report released this week on the plane known as the Joint Strike Fighter.

The report questions a fundamental tenet of the Pentagon’s costliest weapons program — that building different versions on a common base will reduce costs. Rand analyzed an estimated $1.5 trillion “life-cycle cost” that includes acquisition plus long-term support of the fleet.

The Pentagon projects a price tag of $391.2 billion to build a fleet of 2,443 F-35s, a 68 percent increase from the projection in 2001, measured in current dollars. The number of aircraft the Pentagon plans to buy is 409 fewer than called for originally.

“Our program has had some challenges in the past, but I would tell you, ‘Come look at us today.’” Lorraine Martin, general manager of the F-35 program, told reporters last week.

She said the company is meeting its “commitments not only on the delivery of the capability, on time, on the production line, but also our costs coming down aircraft after aircraft.”

This year, lawmakers, the Government Accountability Office and the Pentagon’s test office have said the aircraft is making progress in flight tests and in stabilizing production.

Falling Short

While the initial goal for the F-35 was to have 80 percent of the airframe components in common for the three versions, Rand found that by 2008 that had dropped to between 27 percent and 43 percent because of development difficulties and increasing weight.

“As of this writing, it is not clear how common the mission systems, avionics, software and engine will be among the three service variants,” said Rand, based in Santa Monica, California.

“The tension between maintaining maximum commonality and meeting different service requirements has been difficult to resolve,” Rand said. That’s resulted “in less common variants, greater technical complexity and risk”, as well as difficulty in “achieving the promised savings.”

The Pentagon’s winner-take-all approach also meant that “Lockheed Martin is now the only prime contractor actively leading” an advanced stealth fighter program “for the foreseeable future,” Rand said. Bethesda, Maryland-based Lockheed beat Boeing Co. for the program in October 2001.

“Such a situation reduces the potential for future competition, may discourage innovation and makes costs more difficult to control,” the study found.

The 100th F-35 rolled off Lockheed’s production line in Fort Worth, Texas, last week.

via Lockheed F-35 Bad Deal as One Jet for All, Report Finds | Bloomberg.