Lockheed, Pentagon cite improved F-35 quality work since end 2012


* Pentagon says 78 percent of issues raised alreadyaddressed

* "Scrap and rework" rate said to be coming down

* Inspector general cites nearly 900 quality issues on everyjet built

By Andrea Shalal-Esa

WASHINGTON, Sept 30 (Reuters) - Lockheed Martin Corp has resolved many quality problems on the $392 billion F-35fighter jet program since a troubling audit by the Pentagoninspector general's office last year, top U.S. government andindustry officials said on Monday.

The officials were commenting on a report on the year-longin depth assessment by the inspector general, which wascompleted in December 2012, but not released until Monday.

The report said each radar-evading fighter jet built hadover 800 quality issues on average, and faulted both thePentagon's F-35 program office and the Defense ContractsManagement Agency for "inadequate" and "ineffective" oversightof the Pentagon's costliest weapons program.

The report said the issues could lead to "nonconforminghardware, less reliable aircraft and increased cost," but saidthe F-35 program office was implementing corrective actions.

Additional assessments of the program were being planned,the report added.

The F-35 program is running years behind schedule and 70percent over initial cost estimates, but Pentagon officials sayit has made progress on flight testing, production and long-termoperating costs. They have also vowed to protect the programfrom across-the-board budget cuts to ensure it stays on track.

Lockheed is building three variants of the new jet for theU.S. military and eight countries that funded its development:Britain, Canada, Australia, Norway, Italy, Turkey, Denmark andthe Netherlands. Israel and Japan have also ordered jets.

The Pentagon's deputy F-35 program director and Lockheedexecutives cited significant improvements since the inspectorgeneral's assessment concluded last year. The study was thefirst of its kind ever done on a major weapons program, theysaid.

"This was a wake-up call that we had to be more rigorous,"Eric Branyan, Lockheed's F-35 vice president of programmanagement, told Reuters in a telephone interview.

"We take this very seriously," he said, adding that Lockheedhad implemented a host of specific initiatives to focus onquality company-wide and had also set up a global qualitycouncil with 10 key suppliers.

Branyan said about 13 percent of the work on any F-35fighter jet centered on resolving quality issues, down fromaround 18 percent during the first low-rate production batch.

He said Lockheed expected to drive that "scrap and rework"rate down to around 6 percent in several years when productionreaches between 500 and 600 jets. The company's popular F-16fighter jet only hit that 6 percent rate after production offour times as many jets - around 2,600 planes, he added.

The IG's report acknowledged some improvement in work on theF-35 program, but said further gains were needed since repairand rework rates continued to add significant cost.

It said there were an average of 859 "quality actionrequests" per aircraft in the fourth lot of low-rate productionjets, down from over 900 on each of the three earlier sets.

The IG report said Lockheed's scrap, rework and repair ratefell to 13.11 percent in fiscal year 2013, which ends Monday,from 13.82 percent a year earlier, showing only "moderate"change.

"Although it would be unrealistic to expect first productionto be issue free, our contractor assessments indicate thatgreater emphasis on quality assurance, requirement flow down andprocess discipline is necessary, if the government is to attainlower program costs," the report said.

Lockheed said it had also reduced the number of hoursassociated with quality issues on each jet to around 80,000,down from around 190,000 hours seen during production of thefirst batch of low-rate production jets.

Navy Rear Admiral Randy Mahr, the No. 2 official in chargeof the F-35 program, said Lockheed and its suppliers were makingprogress in addressing issues raised by the inspector general'sassessment. He said his office was also working closely with theDefense Contract Management Agency to ensure improved oversight.

Of 343 quality problems identified by the IG assessment,some 269 - or 78 percent - had been addressed and closed throughspecific action plans, and remedies were under way for all but10 items, where specific plans still needed approval, said KyraHawn, spokeswoman for the Pentagon's F-35 program office.

Mahr said a majority of the findings were consistent withweaknesses previously identified by the DCMA and the F-35 JointProgram Office, and did not present new or critical issues thataffect the health of the program. But he stressed that the IGassessment was professional and helpful.

"We're intentionally leveraging the lessons learned," Mahrtold a small group of reporters. "You can't inspect yourself. Weunderstand that. That's why the (inspector general) is there. Weneed people to come in and look and point out areas where wearen't paying enough attention."

The inspector general's office looked specifically at workdone by Lockheed, the prime contractor on the F-35 program, andfive suppliers: Northrop Grumman Corp ; Britain's BAESystems Plc ; L-3 Communications Holdings Inc,Honeywell International Inc and the United TechnologiesCorp unit that makes the plane's landing gears.

F-35 program officials said the inspector general's officeinitially planned to look at Pratt & Whitney, another UnitedTechnologies unit that builds the plane's engine under aseparate contract with the government, but later skipped thatpart of the assessment due to funding constraints.

Two engine-related groundings last year occurred after theinspector general's office completed its assessment, Mahr said.

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