Forum: F-35 Lightning II

"In the previous four LRIP contracts, all concurrency-related recurring costs have been borne 100% by the government,” says Joe Dellavedova, spokesman for the JPO. “On 19 August 2011, [the Pentagon acquisition chief] issued an acquisition decision memorandum (ADM) requiring any LRIP 5 production contract to reflect a reasonable allocation for Lockheed Martin to share in the concurrency-cost risk associated with achieving F-35 configuration and capability requirements. The government remains committed to securing a fair agreement with Lockheed Martin to share in concurrency costs. This agreement, or undefinitized contract, will happen in advance of the negotiated final contract.”

ARES/Amy Butler
http://www.aviationweek.com/aw/blogs/de ... d=blogDest

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Quote:

Stevens indicates that the company will not be reimbursed for unpaid bills associated with LRIP 5 long-lead activities until the concurrency issue is settled. Congress allocated roughly $500 million in long lead funding in July 2010 for long-lead items and that funding expired in February. Stevens says that the government's failure to reimburse items since then has amounted to $750 million in unpaid bills through the end of the third financial quarter and will total $1.2 billion by year end. At that time, the company would be out $150 million in cash to keep the supplier base and production operating, said Lockheed CFO Bruce Tanner.

I think this paragraph is the key issue, in that article.

Maybe I'm mistaken... Wasn't it both the Pentagon and JPO equally making pre-conceived cheap unit estimates, based on pre-conceived mass F-35 orders (3,100+), pre-conceived to achieve blk3 IOC in something like 2012? At a time back in 2004 and 2005 when the GAO was openly stepping in to raise both flags and eyebrows based on what they saw as invalid assessments?

Even today, isn't the Pentagon still affirming the official line of 3,100+ total sales being expected? At some point it would seem like an official reset on realistic estimations based on prudent assessments would be justified. I just don't think it's completely fair to be revising a good-guy bad-guy perception of Program flaws, as well as changing the goal posts on the manufacturer half way through the game... Even with an equal share of responsibility for goofing said pre-conceived expectations, it's arguably the Program driver, i.e. the Pentagon who should ultimately be responsible for making accurate assessments as part of the acquisition process and setting feasible requirements.

OK, that's my defense of LM for the day... but I honestly do understand the frustrations which must be on all sides.. God speed.

geogen wrote:

Maybe I'm mistaken... Wasn't it both the Pentagon and JPO equally making pre-conceived cheap unit estimates, based on pre-conceived mass F-35 orders (3,100+), pre-conceived to achieve blk3 IOC in something like 2012? At a time back in 2004 and 2005 when the GAO was openly stepping in to raise both flags and eyebrows based on what they saw as invalid assessments?

Even today, isn't the Pentagon still affirming the official line of 3,100+ total sales being expected? At some point it would seem like an official reset on realistic estimations based on prudent assessments would be justified. I just don't think it's completely fair to be revising a good-guy bad-guy perception of Program flaws, as well as changing the goal posts on the manufacturer half way through the game... Even with an equal share of responsibility for goofing said pre-conceived expectations, it's arguably the Program driver, i.e. the Pentagon who should ultimately be responsible for making accurate assessments as part of the acquisition process and setting feasible requirements.

OK, that's my defense of LM for the day... but I honestly do understand the frustrations which must be on all sides.. God speed.

Does seem optimistic, but it seems likely that the F-35 might make up for its European losses in Asia.

The USAF's Project Liberty MC-12W was a UCA, and surprisingly it worked out alright for L-3. The AF gave the benefit of the doubt, and still paid a modest profit.

Lockheed Airs Gripes With Pentagon Demands Oct 27, 2011

http://www.aviationweek.com/aw/generic/ ... e=Lockheed Airs Gripes With Pentagon Demands

"...Chief Executive Robert Stevens told reporters after the earnings release on Wednesday that Lockheed would be reluctant to accept “unbounded liabilities for unpredictable or unknown events.”

“I think the problem for industry everywhere would be … to have a requirement or a responsibility to be accountable for things that aren’t known, that you can’t predict, that no one can reasonably at this time look forward and either schedule or define or articulate in some way,” Stevens said....

...The F-35 program office responded to that meeting and others by telling Lockheed late on Tuesday that it recognized the need to cap the company’s exposure and would no longer insist on Lockheed paying for all concurrency-related changes, one source familiar with the issue told Reuters.

Lockheed officials say they are anxious to begin formal negotiations on the next batch of F-35 production jets after Shay Assad, director of defense pricing, completes a review next week of what the planes should cost....

...“The government remains committed to securing a fair agreement with Lockheed Martin to share in concurrent costs. This agreement, or undefinitized contract, will happen in advance of the negotiated final contract,” he said."

3 pages at the JUMP.

Think Mr. Stevens should look for a new job. Every corporation that produces and sells an engineered product that requires testing before mass production and delivery to their customers needs to deal with "unbounded liabilities for unpredictable or unknow events." That's why those firms hire leaders that are well versed in managing the complexities of bringing new products to market. With good leadership you minimize the surprises and costs. That's not to say that L-M should not be reimbursed for changes-in-scope that the customer makes but if you design it and it doesn't work then it should be your responsibility to make it work. At least that's what it's like in the majority of manufacturing. An equiable solution is for L-M to pay for the redesign and fabrication while the government picks up the cost of testing the mods.

Think the position that Boeing has taken on the KC-46 is the better rationale for dealing with the realities imposed by the restructuring of the economy in the U.S. Don't think L-M will find much support with the woe is me stance.

Mark

Forum: F-35 Lightning II

LRIP 5 talks stalled over concurrency costs distribution