News

LRIP 6 & 7 Contract Agreements

September 27, 2013

Lockheed Martin Statement
Lockheed Martin is extremely pleased with the LRIP 6 and 7 contract signing, which represents a significant milestone for the F-35 Program and its path to enhanced affordability. With each successive production lot, unit costs have declined. That’s a trend we look forward to continuing as this program moves toward full rate production and operational maturity. Working together with the Joint Program Office, our entire industrial team is focused on delivering the F-35’s 5th generation capabilities to our Armed Forces and partner nations at a 4th generation price point.


Government Statement

The U.S. Department of Defense and Lockheed Martin signed two F-35 contracts today, valued at $8.3 billion, for a total of 71 F-35 Lightning II aircraft to be produced in the sixth and seventh Low-Rate Initial Production (LRIP) lots. These agreements are a significant milestone for the F-35 Program, and reflect cost reduction initiatives shared by government and industry.

The LRIP 6 contract, valued at $4.4 billion ($3.7 billion awarded through a December 2012 undefinitized contract action; ref: N00019-11-C-0083, and $0.7 billion awarded through today’s contract)funds production of 36 aircraft, with average aircraft unit cost approximately 2.5 percent lower than LRIP 5 aircraft. LRIP 6 per variant unit prices (not including engine cost) follow:

· 
23 F-35As CTOL - $103 million/jet
· 
6 F-35B STOVL - $109 million/jet
· 
7 F-35C CV - $120 million/jet

The LRIP 7 contract, valued at $3.9 billion, funds the production of 35 aircraft, with average aircraft unit cost approximately 6 percent lower than LRIP 5 aircraft. F-35 LRIP 7 per variant unit prices (not including engine cost) follow:

· 
24 F-35As CTOL - $98 million/jet
· 
7 F-35B STOVL - $104 million/jet
· 
4 F-35C CV - $116 million/jet

The 71 aircraft are currently in various stages of production. Lockheed Martin will begin delivering LRIP 6 aircraft in the second quarter of 2014 and LRIP 7 jets in the second quarter of 2015. LRIP 6 will mark the first delivery of international F-35 jets for Italy and Australia, and LRIP 7 will mark the first delivery to Norway.

The LRIP 6 and 7 contract terms reduce the government’s exposure to target cost overruns relative to previous LRIP contracts. In the LRIP 6 and 7 buy, Lockheed Martin will cover all cost overruns. The government and Lockheed Martin will share returns (20/80) derived from any under runs in target cost.

The LRIP 6 and 7 contracts contain performance-based payments, whereby the contractor will receive incremental payment as measured goals are achieved along the production line until government aircraft acceptance. LRIP 6 and 7 contracts also include a concurrency clause which requires Lockheed Martin to share costs equally with the government (50/50) for known concurrency changes arising from System Development and Demonstration testing and qualification. Newly discovered concurrency changes identified during LRIP 6 and 7 production periods will be authorized via engineering change proposals.

F-35 engines are funded through separate contract actions with Pratt & Whitney.