The $400 Billion Government Defense Contract – Lockheed F-35

In a recent Reuter’s article written by Andrea Shalal-Esa entitled:  Pentagon, Lockheed “getting close” on next F-35 contract: Kendall, provides some interesting insights into the world of government defense contracts.  Moreover, the article also sheds some light on the recent tensions between the Pentagon and Lockheed Martin Corporation, the manufacturer of the F-35.

The Lockheed Martin F-35 Lightning II is a family of single-seat and single engine multipurpose fighters.  The plane has been designed to perform ground attack, reconnaissance and air defense with stealth capabilities.  There are three primary models of the aircraft:

  • F-35A – A conventional takeoff and landing model that descended from the X-35 (the product of the Joint Strike Fighter Program)
  • F-35B – A short take off and vertical model
  • F-35C – A carrier based version of the aircraft


In October 2001, when the U.S. Defense Department awarded Lockheed Martin the contract to develop the Joint Strike Fighter, it looked like the deal of the century for the company and its customer. In the largest defense procurement in history, Lockheed would produce three variants of one stealthy design to replace the mixed and aging fleets of three U.S. services, saving money and time.

Eleven years later and the program has been plagued by cost over runs and technology problems.  On October 26, 2012, the Pentagon announced that it was withholding $46.5 million from Lockheed Martin Corp because of continued flaws with a business system used to track costs and schedules for the F-35 fighter.

The F-35 has been criticized by Pentagon officials and lawmakers for test-performance failings, delays and its ballooning cost. At an estimated $395.7 billion for eventual production of 2,443 planes, the cost is up 70 percent, adjusted for inflation, from the $233 billion projected when Lockheed Martin won the program from Boeing Co. in late 2001.

What’s even more shocking is that maintenance costs for the aircraft are estimated to be $1.1 trillion over the next 50 years. The F-35 program has been restructured three times in recent years, in part to try to cut costs. Earlier this year the Pentagon said “no more money” would be put toward cost overruns and the military would buy fewer planes if costs rose.

The Defense Department is also bracing for sequestration, a process that would cut the military’s budget by $50 billion a year over a decade, on top of more than $50 billion in annual cuts already on the books.

The aircraft employs advanced technology and weapons systems which are controlled by technology. 9.4 million lines of code are required to manage the aircraft.

A helmet is being developed by Vision Systems International (VSI), a joint venture between Israel’s Elbit Imaging and Rockwell Collins succeeds, it will be the most advanced ever built. It is supposed to let pilots see data from all the plane’s sensors, effectively allowing the pilot to look right through the floor of the plane and all around it. But the project has run into problems with night vision, delays in displaying data, jitter under certain conditions, and more recently, a green glow at the visor’s edges and problems with alignment.

Lockheed and the Defense Department are nearing agreement on a long-delayed contract for a fifth batch of F-35 fighter jets, the Pentagon’s chief weapons buyer told Reuters on Wednesday. “I think we’re getting close,” Defense Undersecretary Frank Kendall told Reuters after a speech to an investor conference hosted by Credit Suisse. Kendall said he had “a very positive meeting” on Tuesday with Lockheed President Marillyn Hewson about a range of issues, including the $396 billion F-35 program, the Pentagon’s largest weapons program.