* Pentagon sees estimates coming down after fall review
* Marine Corps general sees big possible savings
* Estimates based on assumptions, not actual data
By Andrea Shalal-Esa
PARIS, June 18 With development and technology challenges on the Lockheed Martin Corp F-35 fighter increasingly under control, the company and the U.S. military are taking aim at a more vexing problem: the cost of flying and maintaining the new warplane.
U.S. officials worry the current $1.1 trillion price tag for operations and maintenance - sometimes called "sustainment" - will erode international support for the new Joint Strike Fighter, which is critical to ensuring the plane can be as affordable as advertised.
Lockheed is developing three models of the F-35 for the U.S. military and eight countries that are helping fund its development: Britain, Australia, Canada, Norway, Italy, Turkey, Denmark and the Netherlands. They are meant to replace more than a dozen types of warplanes now in use around the world.
"The sustainment cost is our biggest challenge," Lieutenant General Robert Schmidle, deputy Marine Corps commandant for aviation, told Reuters in an interview at the Paris air show.
Production costs for the new single-engine jets are coming down steadily, and even the cost of retrofitting planes to deal with issues discovered during testing, or concurrency cost, is declining. But Pentagon forecasters have clung to their $1-trillion projection for the cost of operating and repairing the fleet of 2,443 radar-evading jets over the next five decades.
"We see no compelling reason to update our life-cycle O&S cost estimate for the program at this time. The evidence we have right now would indicate that our estimate remains sound," Pentagon spokeswoman Maureen Schumann said when asked about the cost projection, which includes 50-odd years of inflation.
Officials with the Pentagon's F-35 program office, military service officials and industry executives, however, have been questioning the operating and maintenance cost projection for years, and more detailed efforts to reduce it are now under way.
"We are attacking the various elements of that cost, trying to bring (it) down," the Pentagon's chief arms buyer, Frank Kendall, told reporters last week. "We're looking very hard at bringing more competition into the sustainment phase, which I think will be very effective at driving down costs. So I think we can make a substantial dent in the current projections."
Air Force Lieutenant General Christopher Bogdan, who runs the F-35 program for the Pentagon, has been exploring plans to open parts of the operations and maintenance to competition for about a year, but no details have yet emerged.
BRINGING THE COSTS DOWN
Kendall said he expected the Pentagon to lower its official projections of operating and maintenance costs - as well as the estimated cost per flying hour - after a detailed review this fall. "That number will come down," he said. "I don't know if it will come down dramatically but it'll come down significantly."
Schmidle said he had been interrogating every aspect of the current sustainment cost estimates and the assumptions underlying them, including how often the Marine Corps' B-model would use a separate lift fan that allows it to take off from shorter runways and land like a helicopter.
Schmidle said he believed the operating cost estimates for the Marine Corps' B-model jet could be reduced by hundreds of millions of dollars each year by revisiting those assumptions, and by using actual data from the F-35B jets that are already flying, instead of extrapolating from the usage of earlier planes such as the AV-8B Harrier.
For instance, the initial projections assumed the B-models would be use in the short takeoff, vertical landing mode 80 percent of the time, but such operations only accounted for about 10 percent of anticipated missions, Schmidle said.
He said changes in maintenance procedures - including doing some work in-house instead of outsourcing it to Lockheed - could also generate big savings.
Additional savings were also possible on the F135 engine built by Pratt & Whitney, a unit of United Technologies Corp , that powers the F-35, Schmidle said.
Pratt officials say they have offered the Pentagon a fixed-price contract for maintenance of the engines beginning in 2015, four years earlier than planned, a deal they say could save billions of dollars over the long term.
The Pentagon has not responded to requests for a comment about Pratt's proposal. Officials say they are evaluating that proposal in the context of the larger review of overall sustainment costs this fall.
Steve O'Bryan, vice president of the Lockheed F-35 program, said Lockhheed was focused on continuing to drive the operating and maintenance costs of the airplane down, and was responding to questions from the Pentagon's F-35 program office.
"We're focused not only on the estimates that are out there, but ... what are the actual tangible actions outside the estimate of getting to a lower life-cycle cost," he said, citing efforts to redesign components and simplify maintenance procedures, which could help lower costs in the longer term.
O'Bryan said those efforts would gather momentum as more actual data from the aircraft that are already flying came in.