Lockheed Martin
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Lockheed to Reimburse DoD for Rejected F-35 Parts

Oct. 1, 2020
The contractor agreed to provide $71 million worth of services for the Stealth fighter program, in compensation for parts supplied without electronic data records for individual parts' history and remaining service life.

Lockheed Martin Corp. has an unofficial agreement to provide the U.S. Dept. of Defense with $71 million worth of services for the F-35 Lightning II Stealth fighter program, in compensation for supplying parts that were not suitable for installation in the aircraft.

The F-35 is the largest defense program and one frequently criticized for escalating unit costs and maintenance costs. While each jet involves multiple subsystems and thousands of individual parts, DoD has made known its concern over the availability of electronic data records for individual parts' history and remaining service life. Such data is critical for aircraft maintenance, and each F-35 reportedly has about 1,000 parts (among about 50,000 total per aircraft) that require individual data records.

The problem was first raised by the Pentagon's inspector general in a 2019 audit, and compensation was sought by the House Armed Services Committee in its FY 2020 defense policy bill.

Reportedly, over the course of many months Lockheed delivered parts considered inadequate for installation because they were supplied without the requisite data. F-35 maintenance technicians were said to be unable to perform their work properly or on time due to the unavailability of suitable replacement parts. One report claimed that in a single 2018 delivery, 80% of the supplied parts could not be installed because of missing data records.

Negotiations between Lockheed and DoD started in April, and in July it was reported that the two had agreed on the scope of the problem and the need for some compensation.

The Pentagon's F-35 program office said in July that Lockheed's 2021-2023 support contract requires that 99% of delivered parts must include the required information in order for the contractor to collect its contract fees. "As of June 2020, we're at 83% and climbing" and "we expect 90% (or higher)" by Dec. 31, according to a statement at that time.

The current terms for compensation were reached in mid-September, according to published reports. The Defense Contract Management Agency is still “working out the repayment details before a formal document will be signed,” an agency spokesman stated to Bloomberg News.

“Negotiations on repayment are ongoing, but we anticipate it being a combination of credits toward improvements already made” and future improvements to Lockheed’s parts management system, according to Matthew Montgomery.

The F-35 is a series of three different, single-engine aircraft with Stealth capability and designed for ground attack and combat. It's deployed by the U.S Air Force, U.S. Marine Corps, and U.S. Navy, and the defense forces of multiple allied nations. Each aircraft is valued at $89.2 million to $115.5 million, depending on the model, and while Lockheed is the lead contractor there are hundreds of suppliers included in the program, the largest for the DoD.

To date, about 550 of the aircraft have been delivered to the USAF, USMC, and USN, and U.S. allies' defense forces.

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