Lockheed Gets $7.8 Billion in Contracts for 71 More F-35s

Lockheed Martin Corp. (LMT) received two more production contracts worth $7.8 billion for 71 F-35 jets, the Pentagon said today.

The announcement for the sixth and seventh contracts is for 36 and 35 jets respectively. The sixth contract, including money already allocated, is valued at $4.4 billion, of which $742 million was awarded today. The seventh contract is valued at $3.4 billion.

The contracts contain provisions that, unlike the five previous contracts, will require Bethesda, Maryland-based Lockheed Martin to absorb all cost overruns, the Pentagon program office said in a statement.

Lockheed Martin will get to keep 80 cents for every $1 that costs fall below targets, the Pentagon said. Today’s contracts mean that Lockheed Martin has 166 production aircraft under contract; the 100th is scheduled to roll off the production line Sunday. The first aircraft being sent to Italy, Australia and Norway will be delivered in the seventh contract.

The aircraft unit cost for the sixth contract is about 2.5 percent lower than basic prices -- excluding engines -- in the fifth contract, the Pentagon said. The average unit cost of jets in the seventh contract is estimated to be about 6 percent lower than the fifth.

The Pentagon’s projected price tag of $391.2 billion for a fleet of 2,443 aircraft is a 68 percent increase from the projection in 2001, as measured in current dollars. The number of aircraft also is 409 fewer than called for in the original program.

The rising costs and troubles in building the plane even as it’s being developed have led to criticism in Congress. This year, lawmakers, the Government Accountability Office and the Pentagon test office have said the aircraft is making progress in flight tests and in stabilizing production.

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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