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Lockheed F-35 Aircraft Costs Rise About 4.3%, Pentagon Says

The cost to develop and buy 2,443 Lockheed Martin Corp. (LMT) F-35 fighters with engines from United Technologies Corp. (UTX) has increased about 4.3 percent since 2010, according to new Pentagon figures.

The production and acquisition costs have risen to $395.6 billion from $379.3 billion, according to the Pentagon’s Selected Acquisition Report delivered to Congress today.

The 4.3 percent increase is “not bad, but on a program of this size even a small percentage increase translates into serious dollars,” Jeremiah Gertler, a military aircraft analyst for the non-partisan Congressional Research Service, said in an e-mailed statement.

The Pentagon estimated the cost to maintain and support 2,443 of the F-35s worldwide, including fuel, pilot training, and maintenance, rose to $1.1 trillion from $1 trillion, last year’s estimate.

The 4.3 percent increase on the F-35, the Pentagon’s largest and most scrutinized program, is in keeping with a 5 percent cost increase for major weapons reported today by the U.S. Government Accountability Office.

The Pentagon’s independent cost assessment office in June 2010 pegged the F-35s total program acquisition cost in inflation-adjusted “then-year” dollars at $382 billion.

‘Finding Design Issues’

“We’re still about 20 percent of the way through the test program” on the F-35, Frank Kendall, the Pentagon’s acting undersecretary for acquisition, told the Senate Armed Services Committee today. “We are finding design issues, as we go through the test program, that we have to correct.”

“So there are some cost adjustments associated with that,” he said. “But I do think that the strike fighter is getting under control.”

The Pentagon report said the Air Force, Navy and Marines have asked to delay declaring when they plan to deem the first F-35 squadrons ready for combat.

“They are pleased with the progress they have witnessed over the past year but wish to observe additional results during 2012,” according to the report.

The program’s original goals, set in late 2001, anticipated the Marines declaring an operational capability this December and the Air Force and Navy in April 2016.

Now “the program anticipates the services will identify their initial operational capabilities in 2013,” according to the report.

Inflation, Delays

The cost for the F-35’s airframe increased $10.6 billion to $331 billion “due primarily to the application of revised” inflation escalation indexes and the effect of delaying aircraft purchases three consecutive years, the Pentagon said.

The Air Force and Navy have each extended by two years the completion of their program purchases -- the Air Force to 2037 and the Navy to 2029, the Pentagon said.

Contractor labor hours that were greater than estimated added $4 million, and slower-than-expected international sales added $832.6 million, according to the Pentagon.

Engine costs increased mostly because of an increase of about $4 billion in estimates for spare parts. Revised inflation estimates added $705 million, the Pentagon said.

The Pentagon report said the Pentagon planned to buy 62 aircraft in 2014, 44 in 2015, 66 in 2016 and 76 in 2017 -- down 33, 37, 42 and 54 planes from last year’s plan.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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