By Andrea Shalal-Esa
WASHINGTON (Reuters) - Top Pentagon officials on Wednesday cited both progress and continuing risks on the $396 billion Lockheed Martin Corp F-35 fighter program, and said Singapore had shown "tremendous interest" in the next-generation stealth fighter.
Air Force Lieutenant General Christopher Bogdan, the Pentagon's F-35 program chief, told a subcommittee that he expects to reach agreement with Lockheed about a sixth and seventh batch of F-35s by the end of May, followed by a contract award in June. Sources familiar with the matter said the deal would cover 71 planes and would be worth about $9 billion.
Bogdan told a subcommittee of the Senate Armed Services Committee that Singapore would likely decide by this summer whether to buy the new warplane.
He said he was also "cautiously optimistic" that South Korea would also join the multinational program when it announces the winner of a 60-plane competition in June.
Boeing Co's F-15 Silent Eagle and the Eurofighter Typhoon, built by EADS, Finmeccanica SpA and BAE Systems Plc, are also competing for the contract.
The United States is counting on foreign sales of the new radar-evading fighter to help drive down the plane's cost, which has risen sharply since the program began in 2001 and may go up further if budget cuts by Washington or other countries postpone or curtail their orders.
U.S. allies in Asia are particularly interested in the Lockheed plane given China's unveiling of two new fighter planes over a period of 22 months, according to U.S. defense officials.
Lieutenant General Charles Davis, the top uniformed Air Force acquisition official, told lawmakers that China may have used data from unclassified U.S. computer networks to design and build the planes, although he said the Chinese planes' capabilities would probably not measure up to those of the F-35 and F-22 fighters, both built by Lockheed.
Beijing and Washington have traded accusations in recent months of massive cyber intrusions. The United States says hacking attacks emanating from China have targeted U.S. government and corporate computer networks among others, stealing government and commercial data.
Wednesday's hearing by the Senate Armed Service Committee's subcommittee on tactical air and land forces showed growing confidence in the troubled F-35 fighter program after years of cost overruns and schedule delays.
Bogdan, other military officials and senators all said they were heartened by signs of progress on the program, including its production cost, but remained concerned about projections that it will cost over $1 trillion to operate the new planes over the next five decades.
The Pentagon's chief arms buyer, Frank Kendall, told reporters at a separate event that he felt "much more comfortable" about the program now than just a year and a half ago, although he wanted to maintain pressure on Lockheed to drive down the new airplane's production and operating costs.
Northrop Grumman Corp and Britain's BAE Systems are the main subcontractors to Lockheed on the F-35 program.
Bogdan said the F-35 program office was actively working on ways to reduce the cost of operating and maintaining the planes, including by opening that work to more competition.
Davis and Bogdan both warned that mandatory budget-driven cuts to the program in fiscal 2013 could increase the cost of the remaining airplanes to be bought by millions of dollars. They said it was still unclear exactly how planes would have to be cut under the sequestration cuts that took effect on March 1.
SOFTWARE CHALLENGE REMAINS
Bogdan welcomed recent management changes at Lockheed, and said the executives running the company and the F-35 program now showed "a different culture and a different attitude."
Bogdan made waves earlier this year when he accused Lockheed and Pratt & Whitney, a unit of United Technologies Corp that builds the engine for the F-35, of being more focused on short-term profits than the long-term future of the program.
On Wednesday, Bogdan said doing business with the two companies had been difficult, but things were "getting better." he said both companies were sharing more risk in the program.
He said contracts with Lockheed had also been structured to tie incentives more closely to performance, including $100 million in fees pegged to timely delivery of software, and a total of $237 million in fees available only if the company met all the requirements for the total weapons system.
"The jury's still out," he said, adding, "I will be continuing to monitor this."
He said the program's biggest challenge remained completing the final version of the complex software needed for the plane.
He said he saw "some risk" that the Block 3F software being developed by Lockheed would be delayed beyond late 2017, when the Air Force needs it to be able to start using the warplanes for military operations.
(Reporting by Andrea Shalal-Esa; Editing by Gary Hill and Lisa Shumaker)
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