WASHINGTON (Reuters) - Key U.S. senators raised fresh questions about Lockheed Martin Corp's $382 billion F-35 fighter program on Monday as the Pentagon's top weapons buyer underscored deep flaws in the way the multinational arms program was set up from the start.
The unusually blunt talk about the most expensive U.S. arms program came a week before the release of a fiscal 2013 budget plan that is expected to postpone funding for 179 warplanes until after 2017, a move that has Australia and other international partners questioning their own procurement plans.
Cuts to the F-35 program are part of the Pentagon's plan to start implementing $487 billion in defense spending reductions over the next decade.
The leaders of the Senate Armed Services Committee blasted Defense Secretary Leon Panetta's decision to lift a "probation" imposed on the Marine Corps variant of the F-35 a year ahead of schedule, saying the move appeared premature and was not vetted with Congress.
Senator Carl Levin, the committee's chairman, and Senator John McCain, its top Republican, cited continuing cost overruns on the F-35 program and said Panetta had wasted a chance to "focus Lockheed Martin's attention and disrupt 'business as usual' in this multibillion-dollar effort."[ID:nL2E8D6IKK]
They said Lockheed's fourth production contract for 32 F-35 jets was expected to overrun its target cost of $3.46 billion by $245 million, and that the cost of retrofitting planes already built would add $237 million more to the program's budget.
Panetta last month threw his support behind the F-35B model, which takes off from shorter runways and lands like a helicopter, during a carefully orchestrated visit to a Maryland military base where the warplanes are being tested.
But a week later, he told reporters the Pentagon would further slow procurement of new F-35s to allow more time for development and testing -- news that could prompt the eight international partners to cut or delay their orders as well.
Australia has already said it is rethinking its plans to buy 12 jets, Turkey has put off buying two jets, and Italy may follow suit, according to FlightGlobal. The other partners are Britain, Denmark, Norway, the Netherland, and Canada.
Frank Kendall, the Pentagon's acting acquisition chief, said the U.S. military was committed to the program, but he told industry executives at a Washington think tank that the United States was clearly "paying the price" for starting production of the new jets years before their first flight test.
"Putting the F-35 into production years before the first test flight was acquisition malpractice. It should not have been done," Kendall said in remarks after a speech at the Center for Strategic and International Studies.
Initial development work on the fighter began in 1996 under the Clinton administration. Lockheed then beat out Boeing Co to win the program in 2001, early in the administration of former President George W. Bush.
Kendall said the plane's problems so far were typical of those seen with other fighter jets and there was nothing that would prevent continued production at the current low rates.
The F-35 has completed about 20 percent of its required testing and should accomplish an additional 15 to 20 percent of testing in each of the coming years, Kendall said.
Lockheed, which says the F-35 will account for 20 percent of its revenues once it reaches full production, insisted that the program was continuing to make good progress, citing Panetta's decision to lifted probation for the Marine Corp variant and better than expected flight test results for 2011.
Lockheed spokesman Michael Rein said the U.S. government's plan for concurrent production and development would have affected any winning bidder. He noted that most fighter plane programs had some degree of this concurrency.
"Lockheed Martin has worked hard during the past decade to cost effectively meet government procurement requirements," he said, noting that each successive batch of F-35 jets had less "concurrency" costs -- the cost of retrofitting already built planes to deal with problems found during testing.
Kendall said the Pentagon had counted on improved design and simulation tools to catch possible problems before jets went into low-rate production, but those design tools failed. He said he hoped no more serious issues came up in coming years, which would allow Lockheed to increase output and cut costs.
"The key to getting the cost down on the F-35 is getting the production rate up and we need to do that as soon as we're ready to do it, but we're not ready to do it yet," he said.
President Barack Obama last month nominated Kendall, who has held a series of jobs at the Pentagon since 1982, to permanently take over as chief arms buyer. The Senate must approve the nomination, but no hearing date has been set.
Kendall, who had been the deputy chief arms buyer for the past two years, said he was already working on various initiatives to rein in chronic cost overruns and schedule delays on other major weapons programs, as well as service contracts that comprise about half of Pentagon procurement spending.
He discussed measures to train acquisition officials, review and analyze requirements to understand the full cost of programs before they are launched, and underscored the Pentagon's commitment to maintaining the defense industrial base.
Kendall also warned that there were no simple, single-point solutions, including the fixed-price contracts favored by lawmakers and Pentagon officials on the F-35 program and others.
He said the United States was not facing another "procurement holiday" and cuts to weapons programs would not be as steep as after the end of the Cold War.
But he said the cuts would approach those post-Cold War levels if lawmakers did not reverse another $500 billion in spending cuts that are due to take effect in January 2013.
Reporting By Andrea Shalal-Esa; Editing by Tim Dobbyn and Richard Chang