Cost Reductions From One-Way Contract

At the dollar amount the government unilaterally imposed on Lockheed Martin for Lot 9 F-35 production, there will be a “3.7 percent reduction (weighted average) from the (Low Rate Initial Production) 8 contract signed in December 2014, and an overall 58 percent price reduction since the LRIP 1 contract,” the Joint Strike Fighter system program office said in a statement. A system program office spokesman declined to characterize how far apart the government and Lockheed’s prices were, but an industry source said the prices were “not that far apart,” though the disagreements were “fundamental.” Industry officials said LRIP 9 is now the largest unilateral contract ever imposed by the Defense Department. Lot 8 was for 43 F-35s, while Lot 9 comprises 57 aircraft: 42 F-35As, 13 F-35Bs, and 2 F-35Cs. Of the 57, 34 are for the US and of those, 26 are F-35As for the Air Force. Other Lot 9 aircraft go to Britain, Israel, Italy, Japan, and Norway. Lot 9 aircraft are already well under construction and should start delivering in early 2017. “It takes two years to build an F-35,” the SPO spokesman said.