Lockheed: F-35 Can Compete On Cost

Lockheed Martin is aggressively countering the belief that the F-35 Joint Strike Fighter is becoming unaffordable, claiming its cost will be competitive with the latest F-16s and F/A-18s — if planned production rates are achieved.
“If we secure the production volume to drive down the learning curve, we expect the acquisition cost to be approximately comparable to a similarly equipped [F/A-18E/F] or F-16 Block 60,” CEO Robert Stevens said during a media event near Washington June 17.
The company is projecting a unit recurring flyaway (URF) cost of “about $60 million” (in 2010 dollars) for the conventional takeoff and landing F-35A, including engine. This compares with the $80 million URF estimate by the Pentagon’s Cost Analysis and Program Evaluation (CAPE) group, says Steve O’Bryan, vice president F-35 business development.

Lockheed’s definition of URF is not used by the Pentagon to measure F-35 costs. Instead it uses average procurement unit cost (APUC), which includes associated military construction and is an average across all three JSF variants. The CAPE estimates the APUC has increased by more than 80% since the program began in 2001, to $92.4 million (in 2002 dollars). Cost growth forced the Pentagon to recertify the F-35 program in May (Aerospace DAILY, June 3).
Lockheed’s assertion is based on contracted costs for the first three lots of low-rate initial production (LRIP), plus the negotiated price for the fourth lot — a “handshake agreement” which is expected within two weeks. O’Bryan says the aircraft price is 20% below the CAPE estimate for LRIP 3 and will be “at least 20%” below for LRIP 4.
“Similarly equipped” is an important caveat, as the price of the F-35 includes the radar, targeting pod, electronic warfare system, jammers, helmet-mounted display and other equipment not included in unit costs for the F-16 and F/A-18, O’Bryan says.
Lockheed expects to achieve its $60 million price goal for the F-35A around the end of LRIP in 2016-17, based on the assumption that production will achieve its targeted rate of between 120 and 200 aircraft a year, including production for international partners. “It depends on the ramp rate,” he says.
International customers will pay a price “at or below the unit recurring flyaway cost” for an F-35A, O’Bryan says. The short-takeoff and landing F-35B and F-35C carrier variant will be more expensive than the A-model, he says.
From the initial two-aircraft production lot to the negotiated price for the 32-aircraft LRIP 4, Lockheed has reduced the air-vehicle cost by 50%, Stevens says. The price does not include the F135 engine, which is purchased separately from Pratt & Whitney.
“With adequate production volume and ramp rate, the [fifth-generation] F-35 will be very competitive on price tag with fourth-generation aircraft in production today,” he says.
Whereas the first three lots were cost-plus, LRIP 4 is being negotiated as a fixed-price incentive contract, two years earlier than originally planned. Stevens says this underlines the company’s confidence in its cost estimates.

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