Lockheed in $3.49 billion U.S. F-35 fighter deal

WASHINGTON (Reuters) - Lockheed Martin Corp (LMT.N) won a $3.49 billion Defense Department contract to build 31 F-35 Joint Strike Fighter aircraft, the fourth batch of what is on track to be the priciest U.S. arms purchase.

Under the deal announced by the Pentagon on Friday, Lockheed will produce 10 F-35A conventional takeoff and landing models for the U.S. Air Force, 16 F-35B short takeoff/vertical landing variants for the U.S. Marine Corps, four F-35C aircraft-carrier variants for the U.S. Navy and one F-35B for the British Navy, the Pentagon said.

Lockheed, the Pentagon's No. 1 supplier by sales, reached agreement in September with the Defense Department on producing the fourth batch for a fixed price, two years earlier than had been planned.

Previous production contracts had been on a "cost-plus" basis, which lets a contractor shift certain overruns to the government.

On Monday, Ashton Carter, the Pentagon's top arms buyer, and colleagues are to review the F-35 program as a prelude to determining its fiscal 2012 budget.

The program is projected to cost up to $382 billion for 2,443 aircraft over the next two decades.

Defense Secretary Robert Gates earlier this year added 13 months to the program's development phase, withheld $614 million in potential award fees to Lockheed and fired the Marine Corps major general who ran it.

Lockheed Martin is developing the F-35 with chief subcontractors Northrop Grumman Corp (NOC.N) and BAE Systems Plc (BAES.L).

A total of 31 radar-evading F-35s have been purchased in the previous three production batches. Three of these aircraft have exited Lockheed Martin's factory in Fort Worth, Texas. Nineteen test aircraft also have rolled out, the company said.

The U.S. and eight nations partnering in the project -- Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark and Norway -- plan to acquire more than 3,100 F-35s. Israel recently announced plans to purchase about 20 at a cost of about $96 million per aircraft.

(Reporting by Jim Wolf; Editing by Tim Dobbyn)