WASHINGTON Dec 12 Future Pentagon purchases of
the F-35 Joint Strike Fighter from Lockheed Martin will have to
be based on fixed-price contracts under a defense authorization
measure approved on Monday by a joint congressional panel.
The provision, part of the National Defense Authorization
Act, would require fixed-price contracts beginning with the
sixth low-rate production batch of fighters from Lockheed Martin Corp .
The Pentagon is currently trying to finalize a contract for
30 fighters - its fifth lot of aircraft being produced even as
final testing of the radar-evading jet fighter continues.
The Pentagon entered into an initial contract with Lockheed
on Friday for production of Lot 5 aircraft. The agreement
established an initial price ceiling of $4 billion for the
planes, but a final contract will not be concluded until
sometime in 2012.
Lawmakers inserted the fixed-price language into the bill
after learning about Lot 5 contract, angered that the decision
had been taken even as the Senate was debating whether or not
to require the deal to be a fixed-cost contract.
Senator Carl Levin, Democratic chairman of the Senate Armed
Services Committee, said he and the panel's top Republican,
Senator John McCain, were upset that the Pentagon had acted
even though it knew lawmakers were looking at the contract
McCain and Levin have expressed discontent with previous
"cost-plus" contracts that paid Lockheed's costs for producing
the aircraft plus a profit margin on top of that.
They believe the contracts have enabled the cost of the
F-35 program, the Pentagon's most expensive procurement
program, to balloon over the years.
"We take umbrage at the idea that they would proceed on Lot
5 while we are negotiating whether or not there should be a
prohibition on a cost-plus contract on Lot 5. So what we did is
we said no cost-plus starting on Lot 6," Levin said.
"The House (of Representatives) had not acted nor had the
Congress acted, so technically they could do it," he said. "But
frankly I'll be calling in these acquisition folks."
McCain criticized Pentagon acquisition practices.
"One would assume that a fixed-cost contract means that it
wouldn't allow any additional cost to the taxpayers," he said.
"Not true any more. Now it has to be called a firm fixed
cost contract. And maybe next year it'll be a firm fixed cost
maybe-this-time-we-really-mean-it ... contract by golly. I mean
it's insane, it's become insane."
The Senate and House earlier approved different versions of
the authorization bill, which sets policy and authorizes
military expenditures, but does not actually appropriate
The reconciled bill approved by the conference committee
goes back to both chambers for final approval, expected this
week, before it is sent to the president for his signature.