The Pentagon said Friday that it plans to push Congress to approve a deal for more than 400 F-35 fighter jets worth as much as $34 billion in what would be the largest-ever weapons' contract.
Frank Kendall, the Pentagon's acquisition chief, said that committing to buy that many jets over three years starting in fiscal 2018 could yield cost savings as suppliers would be able to plan with more certainty, buy materials in bulk and triple production from existing levels to about 150 planes a year.
The Pentagon said boosting production is crucial to cutting the cost of the F-35 from the $108 million average paid for the main type of the jet in a 43-plane deal agreed last November. Lockheed Martin Corp, the F-35's main contractor, and engine maker Pratt & Whitney recently submitted proposals for the next two batches of aircraft, and alongside other suppliers have pledged to cut the average cost to $80 million to $85 million by 2019,
Even a rise in output to 150 jets a year would fall short of the 200-plane capacity of Lockheed's mile-long assembly plant in Fort Worth, Texas, which currently produces four F-35s a month. Many analysts believe official projections of demand for more than 3,000 jets--including more than 2,400 for the U.S. -- won't be realized. Italy and Japan also plan to assemble some jets.
"We had viewed a 200-a-year rate as a reach and remain of the view that program numbers for F-35 akin to F-16 are fanciful," said Byron Callan, a defense expert at Capital Alpha Partners LLC. Lockheed's F-16 fighter jet has garnered more than 4,500 orders, and many analysts expect the F-35 to secure at most 2,000, depending on international demand.
The Pentagon plans to commission an independent study of the cost benefits of a block buy that would be by far the largest conducted by the department. The Navy last year signed a $17.6 billion deal for 10 submarines from General Dynamics Corp. and Huntington Ingalls Industries Inc.
The forecast double-digit cost savings from a F-35 block buy are also higher than previous Pentagon deals. A recent report from the Congressional Research Service highlighted the difficulty of measuring potential benefits, though cited a Pentagon study showing savings of 2% to 8% over single-year deals on four previous aircraft programs.
Mr. Kendall was speaking following a meeting in Oslo of industry and government officials involved in the F-35, including Lockheed Chief Executive Marillyn Hewson, Northrop Grumman Corp. CEO Wes Bush and BAE Systems PLC's Ian King. Pratt & Whitney, a unit of United Technologies Corp. was represented by its president, Paul Adams.
Mr. Kendall said the tone of the annual meeting had changed following years of technical problems that delayed the jet's entry into service and inflated costs, with the focus on fielding the planes with the U.S. and overseas customers and reducing operating expenses.
The U.S. Marine Corps plans to have the first combat ready squadron of F-35s fielded during the summer, and this week tested six of the planes at once on an aircraft carrier. The U.S. Air Force plans to introduce the plane next year, with the Navy following in 2019, by which time the aircraft is expected to enter full-rate production. Critics note that some of the plane's most advanced features, including some weapons and sensors, won't be ready for several more years.
The U.S. and nine other counties have ordered the plane, with Denmark and Canada also evaluating potential deals.
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