Though the Pentagon has been able to reduce the unit price of the F-35 over the past couple of years, Air Force Secretary Deborah James believes the F-35’s unit price could be decreased even further.
James said Monday the Defense Department has whittled down the unit cost of the aircraft to “fourth-generation cost,” like how much it cost DoD to develop the F-16 in the 1960s and early ’70s. The unit cost of a F-16A/B is $14.6 million in fiscal year 1998 constant dollars while the unit price of a F-16C/D is $18.8 million in constant FY ’98 dollars, according to the Air Force. In constant dollars, the unit price of a F-16A/B would be nearly $21 million in 2016 dollars while a F-16C/D would be roughly $28 million today. $102.1 million, the most recent unit price for a F-35A, would have the same buying power as roughly $69 million in 1998.
James said current DoD leadership and the F-35 Joint Program Office (JPO) is focused every day on reducing the price of F-35 aircraft.
“I know that industry has made concessions to try to bring down the price,” James said at the Atlantic Council think tank in Washington. “Can more of this be accomplished? I would say, probably, yes, the pressure should remain on to do just that.”
F-35 JPO spokesman Joe DellaVedova said Monday with the Lot 9 contract awarded Nov. 2, the unit price of a F-35A conventional variant aircraft is $102.1 million, including jet, engine and profit. He said this is roughly 5.5 percent lower than the Lot 8 contract from 2014 ($108 million per unit) and is 60 percent lower than the Lot 1 contract awarded in 2007.
DellaVedova added that the Lot 9 unit costs for the F-35B short takeoff/vertical landing (STOVL) variant is $131.6 million, including jet, engine and profit. The unit cost for a F-35C aircraft carrier variant is $132.2 million, including jet, engine and profit, he said.
The F-35 program is, once again, under the microscope after President-elect Donald Trump called out the program on Twitter. He said the F-35 program and its costs were out of control and that billions of dollars can, and will, be saved on military and other purchase after his inauguration. While the F-35 suffered massive cost growth in the 2000s, DoD officials believe they have the program’s costs under control.
James said she believed that Trump’s tweet on F-35 was his way of asking questions about the cost of systems. He previously called for the Air Force’s Presidential Aircraft Recapitalization (PAR) program to be canceled. James endorsed Trump’s focus on saving costs on programs, though she thought using Twitter was a different way of doing it.
James mentioned DoD’s use of a unilateral contract action (UCA) for a recent contract award to prime contractor Lockheed Martin [LMT]. This move was unpopular with the company as a UCA, according to Byron Callan of Capital Alpha Partners, is DoD forcing a company to accept its contract and terms. The UCA was used to award Lockheed Martin roughly $6.1 billion on Nov. 2 for 57 aircraft in low-rate initial production (LRIP) Lot 9. Callan said UCAs are very rare and haven’t been used in prior F-35 contracts.
James said the UCA strategy was used because the procurement authority decided further progress wouldn’t be made after a very prolonged period of negotiation. James declined to say if the UCA could be used more, or less, in the future as a tool to keep costs down, instead saying that the UCA used on Nov. 2 was due to a unique set of circumstances and the belief that there wasn’t going to be any more progress made.
Lockheed Martin spokesman Michael Rein said on Nov. 2 that the definitive contract for Lot 9 was not a mutually agreed upon contract. Lockheed Martin is due to start delivering the Lot 9 aircraft in early 2017, DellaVedova said. James said the F-35 program could be deployed to Europe in the not too distant future, possibly the summer of 2017.