Pentagon, Lockheed move forward on F-35 contract

WASHINGTON Mon Dec 5, 2011 4:35pm EST

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WASHINGTON (Reuters) - The Pentagon on Monday said it had reached a tentative agreement with Lockheed Martin Corp (LMT.N) on key aspects of a new contract for F-35 fighter jets, allowing Lockheed to start building a fifth batch of planes and billing the government for incurred costs.

The Pentagon's F-35 program office said Lockheed had agreed to a fixed-price type contract and a concurrency clause under which the Defense Department and Lockheed would share responsibility for modification costs associated with changes discovered during development.

The agreement would allow Lockheed to be reimbursed for money it and its suppliers have spent to prepare for production of a fifth batch of warplanes.

The Pentagon gave no details on the exact value of the contract and number of aircraft procured, saying those details would be announced later.

Lockheed had no immediate comment on the tentative agreement.

In its third quarter earnings report, Lockheed notified investors that it faced a potential liability because the government was refusing to pay for certain parts that Lockheed was already buying for the next phase of production until the dispute over concurrency cost risks was resolved.

Lockheed stock closed up 29 cents to $78.11 on the New York Stock Exchange. It had traded modestly lower earlier in the day.

(Additional reporting by Karen Jacobs in Atlanta; Editing by Carol Bishopric)

(Reporting by Andrea Shalal-Esa)

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