A U.S. Marine Corps F-35B with Marine Medium Tiltrotor Squadron 265 (Rein.), 31st Marine Expeditionary Unit, takes off aboard the amphibious assault ship USS America (LHA-6), in the Pacific Ocean, June 12, 2023. (U.S. Marine Corps photo by Cpl. Christopher R. Lape)

FARNBOROUGH 2024 — Negotiations on a performance-based logistics contract for the F-35 sustainment enterprise appear stalled indefinitely after the US government backed away from negotiations late last year.

When asked about the current status of negotiations in an interview with Breaking Defense, Greg Ulmer, president of Lockheed Martin Aeronautics, said that that “the customer has stepped away.”

“The government elected not to pursue the PBL,” Ulmer said. “So the current program is to annually procure options of the air vehicle’s supply contract to sustain the airplane.”

A spokeswoman for the F-35 Joint Program office said the government is currently “concentrating its efforts” on negotiations for an annual sustainment contract in lieu of pursuing a performance based logistics deal. 

“Although we are disappointed a performance-based logistics contract was unsuccessful at this time, the Government was not in a position to certify that such an arrangement would be cost-neutral or produce better readiness performance, as required by FY22 NDAA Section 356,” the spokeswoman said, referencing the legal requirement for performance-based logistics contracts.

In November, Assistant Secretary of Defense for Sustainment Christopher Lowman told Breaking Defense that the parties could not come to an agreement that would satisfy the congressional mandate to either cut costs or increase readiness, but left open the door for discussions to restart in 2024 for a future contract.  

Lockheed and the JPO finalized a sustainment deal in June that will cover support for the aircraft from July to December, and the parties are currently also negotiating a contract for next year, which will likely be finalized this fall, Ulmer said.

Negotiations for Lots 18 and 19 of F-35 production are still ongoing, said Ulmer, who stated last summer that the two parties were aiming to wrap up talks by the end of 2023. When asked what had delayed a final deal, Ulmer said both the company and the Pentagon had been focused on resolving a pause in F-35 deliveries due to delays on the jet’s Tech Refresh 3 hardware and software upgrade. (Lockheed restarted F-35 deliveries earlier this month.)

Another issue revolves around negotiations for certain US specific requirements associated with Block 4, Ulmer said.

“There’ll be some unique differences for US services with the content that they have on the airplane and then the international [customers], and so we’re negotiating that real time with the JPO customer,” Ulmer said.

The JPO declined to comment on country-specific requirements but said that the program office “is actively engaged in tri-party negotiations with LM and its supply-base to establish fair and reasonable pricing” with the hope of reaching an agreement “as expeditiously as possible.” 

Unit costs for the F-35 increased in lots 15-17 due to inflation and other COVID-19 related financial pressures on the supply chain, though Ulmer noted that the price tag stayed below the rate of inflation. For lots 18-19, costs could continue to be negatively influenced by inflation as well as a lower annual buy rate from the US services, he added.