Pentagon, Lockheed finalize talks on ninth lot of F-35 jets

WASHINGTON (Reuters) - The U.S. Department of Defense and Lockheed Martin Corp LMT.N concluded negotiations on their ninth contract for F-35 fighter jets after 14 months of negotiations on the more than $6.1 billion deal, the Pentagon said on Wednesday.

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The unilateral agreement on the contract for 57 of the new war planes, will give profit margin certainty to Lockheed and its partners who have been producing the jet under a placeholder agreement known as an “undefinitized contract action”.

People familiar with the contract negotiations who spoke under condition of anonymity said the tenth production contract, a 94-plane deal, was still under negotiation.

In a statement, Lockheed said that the contract was “not a mutually agreed upon contract, it was a unilateral contract action, which obligates us to perform under standard terms and conditions, and previously agreed-to items.” Adding, “We are disappointed with the decision by the government to issue a unilateral contract action.”

People familiar with the procurement process said that the unilateral decision was rare.

The previous lot of 43 jets, lot 8, had an average unit price of $108 million per plane. Planes in lot 9 are about $107 million per plane, 3.7 percent less, making it the lowest price per jet thus far.

The F-35 is the Pentagon’s costliest arms program. The U.S. Defense Department expects to spend $391 billion to develop the plane and buy 2,443 of the supersonic, stealthy new warplanes, in the coming decades.

The ninth batch of jets includes 42 F-35 A-model jets for the U.S. Air Force, Norway, Israel and Japan; and 13 F-35 B-model jets, which can handle short takeoffs and vertical landings, for the Marine Corps and the British navy, as well as two carrier-variant F-35C jets for the U.S. Navy.

Lockheed, and its main partners including Northrop Grumman NOC.N, Pratt & Whitney UTX.N and BAE Systems BAES.L, have been developing and building F-35s for the U.S. military and 10 allies.

Lockheed’s F-35 program manager Jeff Babione had previously said that the price of the F-35A conventional takeoff and landing version of the jet would drop to under $100 million per plane in the 10th low-rate production batch.

On Oct. 25 Lockheed, the world’s largest defense contractor, reported a quarterly profit that handily beat analysts’ expectations, as sales of its Sikorsky helicopters pushed total revenue up 14.8 percent.

Reporting by Mike Stone in Washington; Editing by Bernard Orr