Lockheed Martin Corp.
Industryweek 26814 122017 Lockheed Martin F352

On Second Count … Lockheed Late Delivering F-35s, Again

Dec. 20, 2017
Meeting specific contractual delivery markers would boost confidence for Pentagon officials who want to accelerate the pace of production and sign a new production contract for 141 planes.

Lockheed Martin Corp. failed to meet delivery timelines set out in contracts for its F-35 jet for the fourth consecutive year, according to the Pentagon’s contract management agency.

It’s a less upbeat assessment of Lockheed’s performance than was offered earlier this week by the No. 1 U.S. defense contractor, which said it met its “2017 delivery commitment” of 66 planes.

While the company — and the Defense Department’s own F-35 program office — count how many of the fighter jets were turned over in a calendar year based on an agreed-on commitment, the Defense Contract Management Agency zeroes in on the monthly delivery dates set out in production contracts.

The 66 planes delivered in 2017 included nine from the planes’ eighth production contract that were supposed to be ready in 2016, according to the contract agency. Of the remaining 57, 23 were late based on the monthly “contractual requirements,” Mark Woodbury, a spokesman for the agency, said in an email.

The agency said in February that Lockheed “did not meet contract requirements in 2014, 2015 or 2016” but has begun to improve its performance.

‘Hard Work’

At the time, Joe DellaVedova, spokesman for the Pentagon’s F-35 Joint Program Office, said the company and the Pentagon “established a joint committee to deliver 66 aircraft.” DellaVedova said in an email Tuesday that both the contract management agency and Lockheed recognize the importance of setting goals and resolving issues.

The program office “works with our industry partners to make improvements, address challenges and deliver continuous capabilities,” he said.

Lockheed said in an emailed statement that the company “and the F-35 Joint Program Office established a joint commitment to deliver 66 F-35 aircraft in 2017, and on Dec. 15, 2017, we delivered on that commitment.” The contractor noted that the Defense Contract Management Agency “focuses on aircraft-specific contract dates, while our annual target focuses on our total goal for the year.”

In Lockheed’s announcement on Monday, Jeff Babione, the company’s F-35 general manager, said delivery of 66 F-35s in 2017 represents an increase of more than 40% from the previous year and is “a testament to the hard work and dedication of our joint government and industry team to deliver the transformational F-35 air system to the warfighter.”

Meeting the specific delivery markers in contracts would be a confidence-building measure for investors and analysts who follow Lockheed and for Pentagon officials. They want to accelerate the pace of production starting this fiscal year with the eventual signing of an 11th production contract for 141 planes, the most in the program’s history. It also would help bolster the argument that the F-35 has moved past its worst days of delays and cost overruns.

Still, Lockheed’s aeronautics unit “continues to experience ongoing, recurring F-35 quality assurance issues and is unable to deliver on time,” according to an Oct. 23 memo from the Defense Contract Management Agency to senior Pentagon officials preparing for a Nov. 6 meeting with top Lockheed management.

The delays aren’t a major revenue issue for the contractor. The accounting method used by Lockheed lets it book revenue on the F-35 program closer to costs rather than on delivery.

By Tony Capaccio

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