Bloomberg
The Pentagon’s contract management agency forecasts Lockheed Martin Corp. will deliver 57 of its F-35 jets this year, nine fewer than the company plans.
The No. 1 defense contractor “did not meet contract requirements in 2014, 2015 or 2016,” and the Defense Contract Management Agency “forecasts that Lockheed Martin will not meet contract requirements again in 2017,” agency spokesman Mark Woodbury said. Company performance “has, however, improved from the 2014-2016 timeframe.”
Meeting planned deliveries would be a confidence-building measure for investors and analysts who follow Lockheed, which reported its quarterly earnings on Tuesday, and for Pentagon officials who want to accelerate the pace of production starting in fiscal 2018. It also would help bolster the argument that the F-35 has moved past its worst days of delays and cost overruns.
The delays aren’t a major revenue issue for the contractor. The accounting method used by Lockheed lets it book revenue on the F-35 program closer to when costs are incurred rather than upon delivery.
“Am I going to guarantee we can do 66 this year?” Jeff Babione, the company’s F-35 program manager, said last month. “No, but I think everything I see is the factory’s running” and Lockheed will hit the goal, unless “we have some big problem.”
The Government Accountability Office said in its annual F-35 report Monday that Lockheed “is improving aircraft efficiency and product quality” as production is scheduled to more than double over the next five years. Still, the congressional watchdog agency said that flight testing of the F-35 will take about a year to complete and require at least $1 billion more than planned.
The Defense Contract Management Agency said it based its prediction that Lockheed will fall behind this year on “historical performance” and predicted the company will continue to deliver aircraft “an average one to two months later than contractually required.” But it also acknowledged that the Bethesda, Maryland, company “continues to identify issues driving late aircraft deliveries.”
Woodbury wouldn’t elaborate on the past manufacturing and parts flaws that resulted in delays except to note defective coolant-line tubing produced by a subcontractor resulted in Lockheed delivering 46 planes last year instead of the planned 50.
So far this year, Lockheed has delivered 17 F-35s, three ahead of schedule, company spokesman Mike Rein said.
“We have nine more F-35s in flying status nearing delivery,” Rein said. “We have steadily increased our deliveries year-over-year meeting our delivery commitment” for 2013, 2014, and 2015.
Rein said it took about 150,000 hours in 2011 to build an F-35 in 2011 but less than 50,000 hours today. While the GAO confirmed this trend in its report, it said, “some suppliers are delivering late or non-conforming parts, resulting in production line inefficiencies.”
Joe DellaVedova, spokesman for the Pentagon’s F-35 program office, said the company and the Pentagon “have established a joint commitment to deliver 66 aircraft.”
The 66 scheduled to be delivered this year consist of 37 previously planned plus 29 that ran late from previous contracts, according to program office data.
Lockheed’s Babione said the company works closely with the contract management agency because “it’s a team sport here — we can’t deliver the airplane without them. I think they will always look at it perhaps in a more pessimistic manner than we will.”
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