Disciplined Negotiations

Pentagon officials are in the early stages of reviewing Lockheed Martin’s proposal for the F-35 Lot 5 low-rate initial production contract. “The government fully expects to get the benefit of learning wherever we land,” Vice Adm. David Venlet, F-35 program executive officer, told members of the Senate Armed Services Committee last week. Venlet declined to discuss details of the pending contract, but he said the goal is to get “at least as good, if not stronger, incentive lines and ceilings” as with the previous lot. The LRIP Lot 4 contract was the first fixed-price incentive contract in the program’s history, meaning Lockheed is paid a set amount regardless of additional incurred expenses. “Fixed price is good discipline for both us and for contractors who work for us because we have to be able to specify exactly what we want,” said Pentagon weapons buyer Ash Carter during the same hearing. “They have to be able to specify a price, which means they need to have control over their processes and their suppliers.” (Venlet-Carter-Van Buren joint statement)