Reserve Fund Nearly Depleted Following Software Redesign

In what could be viewed as a 'money vs. safety' compromise, Lockheed Martin is seeking Defense Department approval to reduce the number of personnel, test aircraft and flight tests for its F-35 Joint Strike Fighter program, because it is over budget.

The project is now in a seven-year flight-test phase, and Lockheed says it need to replenish a contractually required reserve fund being depleted quickly due to reasons such as delays with engineer's drawings, supplier cost increases, as well as work to fix problems with the wing assembly and weight issues, according to the charts and documentation given to the DoD by Lockheed Martin.

"If there is no reserve, every time there is a problem you have to go back to Congress and ask for more money. It looks really bad" and might increase congressional skepticism about the program, said Loren Thompson, an aerospace analyst and vice president of the Lexington Institute.

A large amount of the funds have been spent on a redesign of a critical electronic part that failed during the 19th sortie in May, which resulted in the aircraft being grounded. Flights should be resumed soon, officials said.

The original contract for the 12-year development and test phase was about $20 billion. Part of that is the stipulation that Lockheed Martin maintain a management reserve fund of about 10 percent of that amount, according to Bloomberg News.

The current reserve fund holds about $392 million of the original $2 billion. Lockheed has said it would like to see it brought back up to at least $1 billion. The reserve fund is usually used to fix problems that arise during the test phase of development.

As ANN has reported, the multibillion dollar JSF is an ambitious program, and not only in terms of money. The F-35 is the first military aircraft to be produced by an international coalition of eight nations to design, finance, build and sell the jet. This required sensitive information sharing, investing large amounts of capital and working together for the greater good.

It is designed with ground troop support capability and be almost invisible to radar. At least 2,458 are scheduled for the production phase.

Lockheed's proposal calls for removing at least two of the 14-plane program and about 700 testing sorties from the 5,000 planned for avionics, communications, radar and weapons integration testing.

The company contends these tests can be conducted just as well, and less costly, in ground simulators and a flying software laboratory now flying on a Boeing 737.

Lockheed spokesperson John Smith said "if the unexpected occurred," and the reserve were exhausted, "we would need to seek additional funding. There's no plan to reduce the number of flights intended to test the aircraft's basic flying qualities and structural strength."

"We are, however, discussing whether our unprecedented integrated laboratory infrastructure and our 737-avionics test bed can logically allow us to reduce our `mission system' flight testing," he said. These ground and flying test facilities "are unprecedented in the history of fighter development," he said.

Thomas Christie was head of Pentagon testing from 2001-2005 and was all for the original test program. He disagrees with Lockheed's assertion.

"Unfortunately, too often the solution to staying on schedule and under cost -- to include maintaining or building up management reserve funds for the inevitable unforeseen problems -- is to reduce test and evaluation," he said. "History is replete with the consequences of this misguided thinking."

Air Force Assistant Secretary for Acquisition Sue Payton said there has not been a decision as of yet on Lockheed's request, but agrees their reserve account does need to be fattened a bit.

"When you run out of your management reserve, it's just like not having any insurance and you break your leg: You're in a world of hurt," she said. "I think we are doing a real bright thing to figure out how we can regain some."

When the program was started in October 2001, cost estimates were $233 billion. It is now projected to cost $299 billion, according to Bloomberg.

FMI: www.lockheedmartin.com, www.defenselink.mil