F-35 Lot 9 Settled, Trump Accelerated Lot 10

Lockheed Martin has dropped any further action against the government in the dispute over the price of F-35 aircraft in the ninth production lot, company program director Jeff Babione told reporters Tuesday. It was a “good news” outcome, said Babione at a company media day in Arlington, Va. “We’ve been able to come to a mutual agreement with our … customer,” he added. “It’s allowed us to accept their [Low Rate Initial Production] 9 offer, and so we will be taking no further action and as far as we’re concerned, that’s behind us.” Babione said he could not disclose the conditions of the agreement. In November, the Joint Program Office said it was unilaterally definitizing the Lot 9 contract because, after 14 months of negotiations and some tide-you-over payments to Lockheed, it was “clear that further negotiations would not result” in a deal. At the time, the company said it was “disappointed” in the JPO decision and would consider recourse through the Armed Force Board of Contract appeals. In early February, that 90-day option expired without Lockheed taking action, but the company said it was looking at other remedies, including under dispute resolution clauses of the F-35 contract. In the meantime, however, President Donald Trump personally intervened in the F-35 program, and said he had reduced the price of the Lot 10 contract by $600 million. Asked about this Tuesday, Lockheed CEO Marillyn Hewson, in a separate session with reporters, said that when Trump “involved himself in that program” it was “perfectly appropriate” because he did so to achieve a “sharper focus on price.” His intervention “helped accelerate” Lot 10 discussions, which were wrapped up a few weeks later. Hewson put Trump’s involvement and Lot 10 price reductions in the context of “his long-term trend of increasing … defense spending” and the fact that the F-35 “is the largest program that the Department of Defense has in its budget.” Hewson and Babione said they are confident there will be a Lot 11 agreement by the end of calendar year 2017. Hewson said Trump has not been involved in Lot 11 discussions thus far.