Lockheed’s Troubled F-35 Unscathed in Pentagon’s Budget | Bloomberg

By Tony Capaccio

The Pentagon wants to spend about $8.4 billion in the next fiscal year to continue developing and purchasing Lockheed Martin Corp. (LMT)’s F-35, the fighter that is seven years behind schedule and 70 percent over initial cost estimates.

The funding includes $6.36 billion to build all 29 of the F-35s previously planned for 2014, including 19 of the version designed for the Air Force, six for the Marine Corps and four for the Navy, according to a budget document obtained today by Bloomberg News. The remaining funds would be for continued development and spare parts.

The proposal for the Joint Strike Fighter will be part of a $526.6 billion defense budget that President Barack Obama will propose next month for the fiscal year starting Oct. 1, according to government officials familiar with the budget plan who asked not to be identified discussing it in advance.

The budget request, which doesn’t include money for war- related expenses such as the conflict in Afghanistan and troops in the Middle East, reflects the Pentagon’s commitment to the F-35, its most expensive weapons program, despite its soaring cost and pressures to cut Pentagon spending. Buying 29 F-35s next year, the same number Congress approved for the current year, would mean stability after reductions from planned purchases for three consecutive years.

Obama’s budget request will be his opening bid in the annual spending negotiations with Congress, which have been delayed and complicated this year by the budget cuts called sequestration. The Pentagon plan, which is always reshaped by congressional committees, will call for $99.3 billion for procurement and $67.5 billion for research and development, according to the officials.

Automatic Cuts

The proposed defense spending for fiscal 2014 doesn’t include automatic cuts of as much as $50 billion that will be imposed unless Obama and Congress rescind or amend the deficit- reduction requirement. That will let the administration make the political case that programs such as the F-35, with the jobs it creates for suppliers in 45 states, will emerge unscathed if Republicans accept Obama’s plan to replace sequestration with a combination of spending cuts and revenue increases.

The estimated cost for a fleet of 2,443 F-35 fighters has climbed to $395.7 billion, a 70 percent increase since 2001. Pentagon officials have prodded Bethesda, Maryland-based Lockheed, the world’s largest defense contractor, and its subcontractors to improve performance and reduce costs.

The F-35 is being developed and built at the same time, an approach that was called “acquisition malpractice” last year by Frank Kendall, who is now the Pentagon’s undersecretary for acquisition.

Calming Anxieties

Over the past three years, the Pentagon deferred planned purchases of 425 F-35s until after 2017.

The F-35 funding to be proposed for fiscal 2014 “will help calm any anxieties amongst the partner nations” buying the jets, Douglas Barrie, senior fellow for military aerospace with the London-based International Institute for Strategic Studies, said in an interview.

Among the partners are the U.K., Italy, Australia, Canada, the Netherlands, Norway, Denmark, Turkey, Singapore, Japan and Israel.

“If you see cuts in the U.S. numbers, then partner nations think, ‘What does this mean for me?’” he said of the prospect that the price per plane would increase.

Under sequestration, the Pentagon must cut as much as $46 billion across 2,500 programs, projects and accounts over the remaining seven months of the fiscal year.

Air Force officials have projected that as many as five of 19 F-35s it requested for this year — part of the 29 for three services — could be cut under sequestration.

‘Big Decision’

“The big decision for me on F-35 will be the decision on the FY 2015 budget: Do we ramp up or not?” Kendall told reporters March 12 at a defense conference in Washington.

The Defense Department plans increases to 44 planes in fiscal 2015 and 66 in fiscal 2016, according to figures included last year in its long-range budget plan. A new plan for fiscal 2014 to 2018 will be released next month.

“Overall, the F-35 Joint Strike Fighter program is moving in the right direction after a long, expensive and arduous learning period,” the U.S. Government Accountability Office said in a report this month.

“Going forward, ensuring affordability — the ability to acquire the aircraft in quantity” that keeps the per-plane price down — “is of paramount concern,” the GAO said.

For Related News and Information: F-35 Fighter Too Big to Kill as Lockheed Hooks 45 States

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

via Lockheed’s Troubled F-35 Unscathed in Pentagon’s Budget | Bloomberg.