LRIP 5 negotiations are still ongoing after months, even though there is more actual cost data from previous lots to help with pricing. Though per-unit prices are coming down, they are still too expensive and Lockheed continues to exceed targets.
Bogdan could be considering an approach similar to the one he used with the Boeing KC-46A contract. After Boeing was selected over EADS to build the new aerial refueler, Bogdan negotiated a fixed-price contract that has been hailed by Pentagon leaders as an example of good acquisition practices. Boeing is taking a loss in the development effort on the assumption that it will make up the revenue later in production. The F-35 is the linchpin of Lockheed Martin's future aircraft manufacturing revenue stream.
In his remarks last week, Bogdan also signaled that Lockheed must be more attentive to the fighter's maintenance plan; some estimates peg the Pentagon's total ownership cost for 50 years at more than $1 trillion, a staggering figure in this fiscal environment. Bogdan, however, says that Lockheed's position as prime contractor does not entitle it to control the life-cycle program. He opened the door to competing all or part of the life-cycle management of the massive aircraft program in the hopes of introducing innovation and affordability. “The basic strategy on the way we are going to sustain this program has got to change,” he says, adding that government depots will also be considered for work.
Poor industry relations have nagged the Air Force for years, partly because of mistakes in its procurement of a combat rescue helicopter in 2006, a KC-135 replacement and, most recently, a light attack aircraft for use in Afghanistan. Confidence in the service has also eroded among lawmakers.
The protracted tanker competition marred the Air Force's relationship with Boeing. One senior Air Force official believes the service was stung by what officers saw as constant “end runs” by the company going to Congress for help.
Since then, however, Boeing and Air Force officials have “lowered their guard,” to allow for a better relationship, says the senior Air Force official. Now, senior officials on both sides of the team meet routinely, and not simply when a problem crops up, the official says. The mistrust was fostered by overly complex protocols on both sides, the official adds, processes that have since been dismantled.
Maj. Gen. Steven Kwast, who heads requirements for Air Combat Command, called for “humility” on the part of industry and the Air Force in a speech at the conference. The parties need to “let go of our sense of control, and we need to collaborate to do the right thing,” he says.