REFILE-WRAPUP 2-Pentagon vows to "protect" funding for F-35 if possible

Tue Mar 12, 2013 9:39pm EDT

* Pentagon chief arms buyer calls plane big priority

* Seven years behind schedule, 70 pct over initial cost

* Contractors making progress on production costs-general

By Andrea Shalal-Esa

WASHINGTON, March 12 (Reuters) - Top Pentagon officials on Tuesday underscored their support for the Lockheed Martin Corp F-35 fighter, vowing to try to protect funding for the most expensive U.S. weapons program despite continued U.S. budget uncertainty and cost over-runs.

The $396 billion program is already seven years behind schedule and 70 percent over initial cost estimates.

"We'll try to protect F-35," Frank Kendall, the Pentagon's top arms buyer, told a defense conference. "There's no question about its priority. Despite sequestration, we'll still have a budget that's adequate to support F-35."

Kendall and other U.S. military officials spoke out in support of the program as it faces potentially damaging budget cuts that could lead to further delays and cost increases.

"It is a transforming aircraft. It will give us dominance in the air, probably our most single important conventional warfighting capability for the foreseeable decades," he told a conference hosted by Credit Suisse and consultant Jim McAleese.

But Kendall said the F-35 program still required much hard work on technical issues, noting that testing of the new radar-evading fighter was only about one-third complete

A congressional watchdog agency said on Monday that the Pentagon needs to budget $12.6 billion each year through 2037 to finish developing and paying for all the fighters it plans to buy. The Government Accountability Office report put the program's total cost at $400 billion.

Lockheed is building three models of the F-35 for three U.S. military branches and eight partner countries that helped fund the plane's development: Britain, Australia, Italy, Turkey, Norway, Denmark, the Netherlands and Canada. But rising costs, schedule delays and mounting budget pressures have forced some of the potential buyers to rethink their plans.

Chief of Naval Operations Admiral Jonathan Greenert said the new plane's capabilities were "tremendous," but acknowledged it would be costly to integrate the F-35 into the Navy's air wings.

Greenert said the F-35 program would suffer if the Navy scrapped its plans to buy 260 C-model planes that can land on carriers, as it would raise the cost of remaining planes to be purchased, but he did not rule out a possible reduction in orders.

Air Force Lieutenant General Christopher Bogdan, who runs the F-35 program, told the conference he was focused on making sure the airplane was affordable to buy and operate.

Bogdan told reporters that he planned to restructure the Pentagon's F-35 office as part of an overall drive to reduce the program's costs and make the organization more efficient.

"Mark my word: I am reorganizing and I am making personnel changes," Bogdan said. He added that he expected Lockheed, the prime contractor for the program, and Pratt & Whitney, which makes the engine for the single-engine warplane, to streamline their administrative operations as well.

Pratt, a unit of United Technologies Corp, said it already ran a lean organization, and the government had rebuffed some of its proposals that would have cut costs further.

Bogdan said it was crucial to make the aircraft more affordable, or orders would drop off, raising costs further. He said he is particularly worried about the projected $1.1 trillion cost of operating and maintaining the planes over the long run, a price tag he called "an astronomical number."

Bogdan said he hoped to avoid the kind of "death spiral" that resulted in much smaller orders for the F-22 fighter, also built by Lockheed, and other aircraft.

He said the program office planned to invite competitive bids for management of F-35 training centers over the next year, noting that he hoped to save up to one-third of the current projected cost by introducing competition.

Bogdan said Lockheed and Pratt were doing a good job of reducing the cost of building the new warplanes, and costs were tracking below those projected in the Pentagon's annual report to Congress on the cost of major weapons programs.