Pentagon wants F-35 contractor accountability as it weighs output boost


By Andrea Shalal-Esa

WASHINGTON, Oct 25 (Reuters) - The Pentagon's chief armsbuyer wants details on how Lockheed Martin Corp andother companies will be held accountable for the quality andreliability of the F-35 fighter jet as he considers whether toapprove an increase in the plane's production, U.S. defenseofficials said on Friday.

Frank Kendall, undersecretary of defense for acquisition,technology and logistics, is asking the Pentagon office thatruns the $392 billion F-35 program to map out how it will ensurethe quality, reliability and maintainability of the newwarplanes as production ramps up in coming years, said theofficials, who were not authorized to speak publicly.

Kendall chaired a five-hour review of the Pentagon's biggestarms program on Monday that showed progress in F-35 development,production and testing, and confirmed that Lockheed and itssuppliers were technically ready to increase production.

But Kendall and other Pentagon officials want to make surethat they have contractual language and other tools in hand tohold Lockheed and engine maker Pratt & Whitney, a unit of UnitedTechnologies Corp, responsible if problems arise.

"The government wants to see how it can incentivize thecontractors to do well, and what leverage it will have if theydon't," said one source familiar with the program.

The Pentagon drive for more rigorous oversight could resultin additional clauses in the next contracts for jets andengines. The contracts are being negotiated separately by Prattand Lockheed with the government in coming months.

Government plans call for Lockheed to increase F-35production from around 36 planes this year to 45 in 2016 andramping up to 110 planes a year by the end of the decade. Thecompany expects to build about 200 jets a year when the program,the largest in Pentagon history, is in full production.

Decisions on future production rates have been complicatedby the lack of a federal government budget for the new fiscalyear that began Oct. 1 and uncertainty about additional cuts inPentagon spending due to take effect under sequestration unlessCongress agrees on other deficit-reducing measures.

Production levels also depend on F-35 orders by othercountries, such as South Korea, which is expected to announceplans as early as December to buy F-35 fighters.

South Korea would be the eighth foreign country to make afirm commitment to buying the F-35, joining the Netherlands,Britain, Italy, Australia, Norway, Israel and Japan.


Lockheed is anxious to lock down the production plan so itcan buy additional $5 million assembly stations for the FortWorth, Texas, plant where the jets are built.

Kendall's office is expected to spell out its requirementsfor continued rigorous oversight of the F-35 program next week.Maureen Schumann, Kendall's spokeswoman, declined comment on theexpected acquisition decision memorandum, or ADM.

The Pentagon restructured the F-35 program in 2010, adding$6 billion to its development effort and slowing down productionto reduce the number of possible retrofits needed since theplane was being produced as it was still undergoing testing, anapproach known as "concurrency."

The F-35 program has also been subjected to intenseoversight in recent years, including a 2012 review by thePentagon inspector general's office of program quality thatfound over 800 issues on each jet built. Lockheed and thegovernment say they have made significant progress since then.

Air Force Lieutenant General Chris Bogdan, who runs theprogram for the Defense Department, was sharply critical of thecontractors when he first took over last year and later accusedthem of trying to "squeeze every nickel" out of the government.

But in September he told an Air Force audience that while hewished the program was "further along," relations with thecontractors were improving.

Lockheed spokesman Michael Rein said it would beinappropriate for the company to comment on a government meetingit did not attend. But he said the company was committed tocontinuing to improve the production and quality of the jets.

"We are fully committed to cost effectively driving costsout of the program while improving efficiencies to deliver theF-35's capabilities to the warfighter, allowing the services tomeet their (initial operational capability) dates," he said.

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