Bloomberg News

Lockheed F-35 Cost Estimate by U.S. Increases 9% in Year

March 30, 2012

Lockheed Martin Corp. (LMT:US)’s F-35 fighter jet, the U.S. military’s most expensive weapons program, will cost $1.51 trillion, a 9 percent increase from the estimate a year ago, according to Pentagon officials.

The program’s projected “life cycle cost” -- including development since 1994, production of 2,443 jets and 55 years of support -- increased from $1.38 trillion in 2010, the officials said today in a briefing for reporters.

“Any cost growth, given our mandate to drive cost out of the program, is not optimal, but from the standpoint of just percentages, it’s not a significant amount from one year to the next,” Major General John Thompson, the deputy F-35 program manager, said.

Holding down the F-35’s cost is a major goal for the Defense Department, Thompson said, echoing statements of other officials, including Frank Kendall, acting undersecretary for acquisition.

Laurie Quincy, a spokeswoman for Bethesda, Maryland-based Lockheed Martin, said the projections “are based on a number of variables that are subject to considerable fluctuations over the next 55 years, making the estimate inherently imprecise.”

“Lockheed Martin remains confident that F-35 operations and support costs will be comparable to or lower than that of the seven platforms it will replace,” she said in an e-mailed statement today.

Effects of Delays

Among causes for the 9 percent increase cited by Thompson and in Pentagon documents were revised inflation-escalation indexes, the effect of delaying aircraft purchases three consecutive years; labor, hours and materials costs that were higher than expected; and international sales that were less than anticipated.

The cost estimate for the acquisition phase alone increased 4.3 percent to $395.7 billion in inflation-adjusted “then- year” dollars.

Support-cost projections increased in part because of fuel- price estimates and a decision to extend calculations for the fleet’s service life to 55 years from 52 years.

Thompson said the F-35 program office estimates were close to those developed by the Pentagon’s independent cost-analysis office.

Independent Office

The similarities make the numbers more credible, Thompson said. Congress created the independent office to improve weapons-cost estimates and help curb excessive cost growth.

The $1.1 trillion represents 55 years of fleet-wide support, from the introduction of the first low-rate production aircraft delivered 18 month ago to the last one delivered years from now, according to Todd Mellon, the Pentagon’s F-35 sustainment director.

The estimate includes all manpower at the aircraft unit- level for the Air Force, Navy and Marines; fuel and spare;, indirect costs associated with security and engineering and updates of technical data and manuals, Mellon said.

It also includes costs to retrofit the aircraft with new capabilities, he said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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