Deal Reached for F-35 Lot 4 Buy

After extensive negotiations, the Defense Department and Lockheed Martin have agreed to the contract terms for the fourth low-rate production lot of F-35 strike fighters, Defense Secretary Robert Gates said Thursday. The parties settled on “a fixed-price incentive fee contract” for the purchase of 30 F-35s for the United States, he told reporters during a Pentagon briefing. This fixed-price contracting mechanism is an example of the changes that DOD is instituting to operate more efficiently and effectively, said Gates. To stress this, he emphasized that the per-unit F-35 price in this batch is 15 percent to 20 percent “below” the costs that DOD’s independent cost estimators had projected earlier this year. DOD and Lockheed will share in the cost of any overruns “up to a fixed ceiling,” and Lockheed would share the rewards if the program comes in under cost, he said. (Gates-Mullen transcript)