By Andrea Shalal-Esa
WASHINGTON, Sept 27 The Pentagon on Friday said
it had finalized two contracts with Lockheed Martin Corp
valued at $7.8 billion for 71 more F-35 fighter jets, citing
what it called significant reductions in the cost of the new
The U.S. Defense Department said it signed a $4.4 billion
contract for a sixth batch of 36 F-35 aircraft, with the average
cost of the planes down 2.5 percent from the previous deal. All
but $743 million of that amount had already been awarded to the
company under a preliminary contract.
The two sides also signed a $3.4 billion contract for 35
aircraft in a seventh batch, which reflected a 6 percent drop in
the average price from the fifth group, it said in a statement.
The Pentagon's F-35 program office said the cost of each
F-35 conventional takeoff A-model jet would drop to $98 million
in the seventh batch of jets, excluding the engine, from $103
million in the sixth lot. It marks the first time the price of
the jet will have dipped below $100 million.
The U.S. government buys the engines directly from Pratt &
Whitney, a unit of United Technologies Corp, under a
The Pentagon has projected it will spend $392 billion to buy
a total of 2,443 stealthy F-35 fighter jets over the next few
decades to replace F-16, F-15, F/A-18 and other warplanes used
by the U.S. Air Force, Navy and Marine Corps.
The program is years behind schedule and nearly 70 percent
over original cost estimates, but U.S. officials said last week
the program is now making progress in flight testing, production
and long-term operating costs.
Lockheed and the Pentagon announced an agreement in
principle for the next 71 jets on July 30. Rear Admiral Randy
Mahr, deputy director of the Pentagon's F-35 program office, had
told reporters on Wednesday that he expected the contracts to be
wrapped up within days.
Lorraine Martin, Lockheed's F-35 program manager, said
production costs had declined with each successive lot of jets.
"That's a trend we look forward to continuing as this
program moves toward full rate production and operational
maturity," Martin said in a statement provided to Reuters.
"Working together with the Joint Program Office, our entire
industrial team is focused on delivering the F-35's
5th-generation capabilities to our armed forces and partner
nations at a 4th-generation price point," she said.
Industry executives use the phrase fifth-generation to refer
to the jet's stealthy coatings and other features that make it
nearly invisible to enemy radar.
Lockheed is building three variants of the F-35 for the U.S.
military and eight countries that helped fund its development:
Britain, Canada, Australia, Turkey, Italy, Norway, Denmark, and
Israel and Japan have also placed orders for the jets.
The F-35 remains in the running for a 60-jet South Korean
fighter competition after Seoul this week rejected a bid by
Boeing Co involving its F-15 Silent Eagle fighter jet.
Lockheed's main subcontractors on the program are Northrop
Grumman Corp and Britain's BAE Systems Plc.
The Pentagon said the price of the B-model that Lockheed is
building for the Marine Corps, would drop to $104 million in the
seventh group from $109 million in the sixth. It said the cost
of the C-model variant, which will be able to land and take off
from aircraft carriers, would drop to $116 million a jet from
$120 million in the sixth lot.
The contracts also reduce the government's exposure to cost
overruns, according to the Pentagon's statement, with Lockheed
agreeing to cover any cost overruns. The government and Lockheed
would share returns on a 20-80 split basis if costs come in
below target, it said.
The two sides will share equally the costs of all known
retrofits needed for the aircraft, while any newly discovered
changes could result in higher contract costs, the Pentagon