Lockheed Martin Corp. received a $1.3 billion Pentagon down payment to continue production of the F-35 while negotiations continue on a contract valued as much as $7.19 billion for 90 aircraft, the biggest order yet.
The $1.28 billion released Wednesday under what’s known as an “undefinitized contract action” will bankroll continued assembly for jets that won’t be delivered until 2018, pay hard-to-maintain suppliers and correct deficiencies found in testing on earlier jets, the Defense Department said in a statement.
“With a complex production line and a dynamic supply chain, it was important to obligate funds” using the down payment process to prevent major delays, said Joe DellaVedova, spokesman for the department’s F-35 program office. “We are confident that the finer terms” of the 10th contract “will be settled over the next few months.”
Lockheed spokesman Mark Johnson in Fort Worth said in an email that the company appreciates the actions taken to “ensure delivery of F-35’s to our warfighter customers.” Lockheed Martin’s Fort Worth plant is in the midst of a $1.2 billion upgrade to prepared the facility for full production.
It was a contrast from the company’s angry response earlier this month when the Pentagon imposed a $6.1 billion final contract for the ninth production lot of 57 jets on its own terms after 18 months of inconclusive negotiations.
In a break from the praise that major contractors and the Pentagon usually lavish on each other, the company complained then that it was “not a mutually agreed-upon” contract and that “we are disappointed with the decision by the government to issue a unilateral contract action.”
The F-35 is the costliest U.S. weapons system, projected at $379 billion for a fleet of 2,443 U.S. planes, with more than 600 additional aircraft to be sold to partners such as the U.K., Australia, Japan and Italy.
Besides Fort Worth, the money advanced Wednesday will pay for work in El Segundo, Calif.; Orlando, Fla.; Nashua, N.H., Baltimore; Nagoya, Japan; and Warton in the U.K., according to the Defense Department.
DellaVedova said the announcement didn’t signal that a $7 billion award is a sure thing for Lockheed, but rather that it’s the ceiling for the 10th contract still subject to talks. He said the final figure will be agreed to next year.
Lockheed and Pentagon officials “intend to have a handshake agreement during the next few months,” he said. Lockheed has had to pay out of its own funds about $1 billion for production costs on the ninth and 10th contracts as negotiations dragged on for over a year.
Both parties were close to agreement before Lockheed rejected the Pentagon’s “best and final offer,” according to industry and government officials familiar with the ninth contract.