The Pentagon and Lockheed Martin are in the final stages of negotiation for the procurement of the next batch of F-35s, Lot 11, according to the Joint Program Office Public Affairs Director Joe DellaVedova, and will continue to procure F-35s on a single-year basis for at least the next three lots.
Recently, the RAND Corporation released a report concluding that a block buy of three years worth of F-35s could allow for $2.1 billion in savings, 4.9 percent the cost of annual contracting.
The block buy “can save money by providing prime contractors and their suppliers the incentive and ability to leverage quantity and schedule certainty and economies of scale, thus generating savings that would not be available under three annual single-lot contracts,” the report stated.
The current deal being reached for 141 jets does not take advantage of those potential savings outlined in the RAND report.
DellaVedova also said that the “the US Services continue to contract annually for Lots 12, 13, and 14” spanning fiscal years 2018 through 2020.
The US services, however, do have approval to procure two years of advanced material and equipment for FY 2019 and FY 2020, DellaVedova said, but there is no multi-year commitment for aircraft and engines.
Other F-35 partners and Foreign Military Sales (FMS) customers have initiated a Block Buy contracting strategy for Lots 12, 13, and 14, DellaVedova said. “This strategy gives F-35 Partners and FMS customers flexibility to purchase all aircraft in a single procurement for Lot 12 (FY 2018) or to procure aircraft and engines in a multiple lot format for Lot 12 (FY 2018), Lot 13 (FY 2019), and Lot 14 (FY 2020).”
Given that the F-35 is still being developed while also in production, the Block Buy strategy does come with some risk. If the design or configuration of the F-35 were to change after purchasing three years worth of aircraft, then the purchaser would be stuck with an old version, needing to pay more for updates and improvements.
Still, DellaVedova said, the risk is “low” for the F-35 partners and FMS customers “because the design of the weapon system will be stable during this period of time. All F-35 variants have completed second life (8,000 hours full life) durability testing. Additionally, 99.9 percent of all hardware and subsystems qualifications are completed, and Block 3F (Full Warfighting) capability has been delivered this year – well before Lots 12, 13, and 14 are delivered.”