By Garrett Reim, 24 February 2021
Lockheed Martin is confident the F-35 stealth fighter’s operating cost will be cut to $25,000 per hour by 2025 if the Joint Program Office that manages the aircraft agrees to a performance-based logistics contract.
The company is under pressure to deliver improvements to the aircraft’s reliability and operating costs as the jet’s leading customer, the US Air Force, considers cheaper alternatives, such as the Lockheed F-16 fighter or a clean-sheet 4.5th-generation combat aircraft.
Greg Ulmer, the company’s executive vice-president of aeronautics, said on 19 February that the company is anticipating a request for proposal for a performance-based logistics contract from the Joint Program Office this coming spring. Lockheed believes it will receive a sole source justification as the only company qualified to maintain the F-35.
Lockheed says it is developing a performance work statement and draft contract structure in coordination with the Joint Program Office.
The Joint Program Office and the Department of Defense have previously expressed scepticism that Lockheed could reduce the F-35’s cost to $25,000 per hour by 2025 – the company’s goal. However, the company points to its track record in reducing the operating costs of the jet in recent years.
“Over the last five years, we’ve reduced the operating costs by 40%,” says Ken Merchant, Lockheed’s F-35 sustainment vice-president. “We’re predicting that we can take another 40% out of that Lockheed-controlled cost, which is about 39% of the cost per flying hour.”
In theory, a multi-year performance-based logistics contract would allow Lockheed to take ownership and control of the whole maintenance and sustainment process of the F-35. That is, opposed to a more conventional maintenance contract which tends to cause customers to order parts and services in disconnected, one-off transactions.
A multi-year performance-based logistics commitment could allow the manufacturer to take advantage of economies of scale savings by purchasing bulk parts and services upfront at lower prices from suppliers. It might also create cheaper and more effective sustainment processes. Some savings would be passed on to military operators of the F-35, while Lockheed would keep the rest as profit.
Lockheed emphasises that the performance-based logistics contract is more than a theory. The company is preparing to execute on such a maintenance arrangement and has implemented similar contracts with its suppliers.
“We believe we’re making the right movements; that we’ve made the right upfront investments in decision support tools and decision analytics, that are helping us make the right calls and move parts to the right places. And, it’s driving those cost savings,” says Merchant. “We also need the government to make similar commitments and savings on their side of the equation as they’ve got 49% of the cost per flying hour on the jet. Many of the things we’re doing will impact those positively on their side of the equation. And so that’s what gives us the confidence that we can get to that [$25,000] by ’25.”
Pratt & Whitney, maker of the F-35’s F135 jet turbine, is responsible for the remainder of the combat aircraft’s operating costs.
Lockheed says the current operating cost of the F-35 is about $36,000 per flight hour. The company believes it can reduce its share of that cost by another 40% by 2025.
