Monday, March 13, 2017

F-35 Procurement Score Card

Long has the F-35 been coming to the forefront. The US government has waited to see the white of Lockheed eyes before moving forward with a robust allotment of F-35 block buys. It needed milestones, political will, and good news before the onslaught of block buys for the F-35 program could head-up its steam. Sometimes Lockheed would build the F-35 on its dime and then milk the US Government with installment payments before a Block buy was completed. When a block buy was approved like Low Rate Initial Production 9 (LRIP 9) much of the work was already an item on Lockheed's production floor, thus avoiding expensive restarts of the production when funding had yet not been approved.

Fig. 1   F-35 Block Buys in Units and types

A second strategy evolved having a massive block buy effort for saving cost on the program when using an old school thinking of... “economy of scale’. The more ordered, the price drops as Lockheed can now expand its production and buy parts and assemblies in mass quantity.  Lockheed could rely on its suppliers to drop supply prices for services rendered in a large scale.

Analysis of the table above in Figure 1 represents a recent signing of Lot 10 for 90 F-35's for Low Rate Initial Production (LRIP). When will that end and go to Full Rate Production (FRP)? It is hard to say however, lot 10-14 has been classified as a LRIP status for the time being. Lockheed is building production space over the next two years. The testing phase awaits 3F and 4F coding validation before allowing Lockheed a ramp up the F-35 program to FRP. The block 12-14 contract anticipates Lockheed moving forward. 

Breaking down the numbers and time is a guess and here is my best guess. Lot 10 building starts in 2017 going forward to sometime in 2018. Lot 11 is not yet a signed contract as it should take a greater part of 2017 to sign it. Lots 12-14 is the granddaddy of all contracts to date. This is the real costs reduction negotiation where President Trump will involve himself during this period. It is different because it is not a lot-by-lot contract process, but an all-in-one for the three lots having a fixed price of about 85 million per aircraft cost (without engines), I would think. It is a contracting for 410 units of the F-35 through this three lots buying strategy for the US military and its partnered nations around the world.

The time line for all this production becomes a mystery but an educated guess based on blocks buys that tend to follow a rule of a year's production equals one lot. Using that as a thumbnail sketch Lot 10 should be completed during 2018 and then Lot 11 and so forth. Listed above is five lots thus five years of production with concurrent testing using software 3F and 4F.  By the end of the fifth year there should be 629 of the F-35’s delivered to the US and its partnered nations starting from lot 10 going forward. By 2022 the US could have about 600 F-35's in its service. Some of which remain as testing aircraft but a great majority combat ready fighters. 

It will have taken from 2011 to 2022 to get to a point where the F-35 will have taken its right full place as a feared fighter. By then the pilots are still discovering new ways of using the F-35 capabilities as pilots learning becomes a works in progress during the next 40-50 years.