F-35 cost overruns threaten Lockheed program
Design and manufacturing problems with the fighter jets jeopardize the Pentagon's largest contract.
The cost overruns have raised questions about the effectiveness of the program. The Pentagon and Lockheed Martin had earlier claimed that the Joint Fighter Jet is an "affordable, higher common fifth generation" aircraft that can be purchased in large quantities due to its cost effectiveness. But these claims seem to be losing ground, even before the first four congressional contracts are complete.
Independent U.S. congressional auditors have claimed that the program lacks reliable design and efficient manufacturing. Lockheed Martin is absorbing $328 million of the overrun costs while the Pentagon is absorbing $672 million.
This outcome has the potential to create many problems for Lockheed Martin. While on one hand, its profitability has been hit, on the other hand, future contracts from the Pentagon are on the line. The Government Accountability Office (GAO) has stated that far too many engineering changes are taking place at high costs and more changes will be required, going forward. It is also doubtful about the manufacturing processes and performance indicators. While the indicators have shown some progress, the performance of the first low-initial production contracts has not been good.
The past and current performance by software in the industry has not always been up to the mark, and it is important that Lockheed Martin demonstrates that the F-35 is a creditable and stable platform. Nonetheless, the GAO has given Lockheed Martin and the program some credit for testing and manufacturing process improvements in 2011.
The cost overruns have put the Pentagon's entire program, which calls for the purchase of 365 aircraft by 2017 with an estimated cost of $69 billion, into the spotlight.
The program initially incurred a loss worth $373 million due to deficiencies discovered in flight testing. Now, with an additional $1 billion for the first 63 aircraft, the Pentagon and Lockheed Martin will have to deliver solid results to allay Congress' fears and instill confidence to go ahead with the contract.
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