Pentagon seeks competition for sustainment of Lockheed F-35

Reuters News

9/28/2012 7:47:53 PM - Reuters News

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The Pentagon on Friday moved toward bringing in other companies to operate and maintain its most expensive weapons program, the F-35 Joint Strike Fighter, a step that could reduce revenues for the current prime contractor, Lockheed Martin Corp.

The move is the latest action by the Pentagon to drive down the cost of the new single-engine, single-seat warplane, whose operations and maintenance costs are currently projected to reach a staggering $1.11 trillion over the coming decades.

Last week, top Pentagon and Air Force officials publicly slammed Lockheed's performance on the new radar-evading jet, whose development and production alone are slated to cost $396 billion. The officials said they were looking at ways to introduce more competition to the program.

Lockheed and the Pentagon remain locked in protracted and tense negotiations about a fifth order of F-35 production jets, with neither government officials nor industry executives expecting an agreement before the end of the third quarter.

On Friday, the Defense Department invited companies to participate in a two-day public forum on November 14-15 on possible opportunities to compete for work managing the supply chain of the new fighter jet and providing support equipment, simulators for training and a computer-based logistics system.

"We want to reduce F-35 life-cycle costs by injecting competition into the program," said Joe DellaVedova, spokesman for the Pentagon's F-35 program office. "We want to collect information and learn what is out there in the marketplace."

The Pentagon said its "industry day" would help "identify potential business sources with the resources, capabilities, and experience to successfully deliver a wide range of hardware and infrastructure services in support of F-35 ... sustainment."

In a notice published on a federal website, the F-35 Joint Program Office (JPO) said it would use information from participating companies and other market research "to refine its acquisition strategy and to evaluate alternatives that will deliver the best value, long-term F-35 sustainment solution."

"This supports the broader F-35 JPO goals of increased affordability, transparency, predictability, and accountability for sustainment costs and performance," it said in the notice posted on www.fedbizopps.gov.

Current estimates for the total cost of operating and maintaining the new warplane over the next 50 years are over $1 trillion, including inflation and projected fuel costs, although officials have said they expect to lower that cost dramatically.

Lockheed said it was the prime contractor for sustainment of the new jets at the moment, and aimed to keep that role. The company said its executives would attend the Pentagon's industry day but it remained confident that it offered the best solution for sustaining all three variants of the F-35.

Lockheed is developing three models of the new fighter plane for the United States and eight countries - Britain, Canada, Australia, Italy, Turkey, Denmark, Norway and the Netherlands.

Lockheed executive vice president Tom Burbage said an agreement signed by all nine countries over six years ago called for Lockheed to provide sustainment services - or "performance-based logistics" - for the new fighter plane.

"At the moment we are the prime contractor for sustainment and it's our intent to stay in that role," Burbage told Reuters. He said Lockheed was currently taking care of logistics for the plane at a Florida training base, and was working to set up operational bases in California, Nevada and Arizona.

The company was also working with international partners to identify ways for their local industries to get involved in long-term sustainment of the new fighter jet, Burbage said.

"At the moment, we're heads down working sustainment very hard every day," Burbage said, adding that Lockheed routinely staged competitions among its suppliers for the very sustainment functions included in the Pentagon's notice.

The Pentagon said the November 14-15 sessions would give Lockheed and other firms an overview of F-35 sustainment requirements, a forum to ask questions, and a chance to have a 30-minute one-on-one session with a government representative.

It said the notice did not represent "a commitment of any kind on the part of the government" and in no way bound the Pentagon to solicit for or award a contract.

The notice listed some areas for possible future competition, including shipping containers, regional warehousing, transportation of spare parts, ground support equipment such as hand tools, and simulators to train pilots.

It also cited the Autonomic Logistics Information System (ALIS), a computer system being developed by Lockheed that is integral to the program and manages functions ranging from parts supply to mission planning.

Lockheed had to rework the system earlier this year after Navy cyber experts discovered a vulnerability in the program. The revamped version is now being tested and should be ready in time for the Marines Corps to use when it gets an initial operational jet at a base in Yuma, Arizona, in November.

(Reporting by Andrea Shalal-Esa; Editing by Gary Hill)