Australia may reconsider F-35 order amid cost blowout: paper

SYDNEY, July 27 (Reuters) - Australia may reconsider a A$16 billion ($17.5 billion) plan to buy 100 of Lockheed Martin Corp's F-35 Joint Strike Fighters because of delivery delays and cost overruns, the Australian Financial Review said on Wednesday.

Repeated delays and ballooning costs in the F-35 programme are now "starting to rub up against" the limits set by the government, the paper quoted Defence Minister Stephen Smith as saying before meeting defence officials in Washington.

Smith also emphasized that Australia's firm orders were for 14 jets only, indicating the government may reconsider the rest of its planned purchase.

The first 14 of the F-35s were initially scheduled to be delivered in 2011 but that has been pushed back to 2014 and even that date may be in jeopardy, the paper added.

The Defence Ministry voiced concerns earlier this year that further delays could create a hole in Australian defences and reports at the time indicated the government was looking for alternatives.

Lockheed is developing three F-35 versions for the United States and eight international partners at a projected cost of more than $382 billion for 2,443 aircraft over the next two decades. It is the most expensive U.S. arms purchase.

The Pentagon's F-35 Joint Program Office previously had said total costs on the first three production batches overshot their contractual targets by 11 to 15 percent. These "cost-plus" deals required the government to pay most of an overrun. (Reporting by Balazs Koranyi)