Lockheed Martin and the JPO near agreement on F-35 Lots 18 and 19
November 24, 2024
The ‘handshake deal’ is an informal initial agreement between Lockheed Martin and the F-35 JPO, covering the next two F-35 production lots (Lots 18 and 19). Previous contracts have tended to include three production lots, but Lot 20 will be part of the first multi-year production agreement, and will therefore be negotiated separately.
The lot 18/19 contract was originally expected to be finalised by the end of 2023, but negotiations were protracted, and long-lead funding for Lot 18 ran out in the third quarter of the year, forcing Lockheed Martin to fund production using some US $400 million of its own funds for the last few months in order to avoid serious supply chain disruption, with an additional $300 million to cover other “impacts across the supply chain.” Though it has been stated that a formal contract finalisation is expected by the end of the year, this is far from guaranteed. When a similar handshake agreement was reached for lots 15-17 in July 2022, the formal contract was not signed until that December.
An official notification of the agreement on Lots 18 and 19 was sent to Congress on 21 November, but final quantities of aircraft and prices were not revealed, with the F-35 Joint Program Office (JPO) and Lockheed indicating only that those figures would be disclosed after the final agreement was signed.
The final agreement is expected to cover roughly 300 aircraft, since Lockheed Martin has said that its Fort Worth final assembly line can output 156 F-35s annually.
A joint statement issued by Lockheed Martin and the F-35 Joint Program Office (JPO) said that: “We have reached an initial agreement as part of ongoing negotiations for the Lot 18/19 Air Vehicle Production Contract. We will share the aircraft quantity and cost figures when a final agreement is signed.”
Lockheed has hinted that inflation may increase the unit price of aircraft in the next two Lots (ending a year-on-year fall in prices), while the negotiations on the Lot 18 and 19 costs have been both delayed and complicated by the problems with the TR-3 (Tech Refresh 3) upgrade, which prevented the Defense Contract Management Agency from approving deliveries leading to a year-long hold on deliveries. The JPO withheld payments of US $7 million per aircraft during the delivery hold, and Lockheed Martin forfeited $60 million in fees.
