President Trump on Monday announced to reporters that he had personally cut the cost of the latest F-35 contract with Lockheed Martin by $600 million. But one aviation expert points out that the cost was going down anyway.
The president told reporters on Monday morning that he appreciated Lockheed Martin being so responsive to his concerns about the high cost of the jet, which he called “a great plane, by the way.”
“They were having a lot of difficulty. There was no movement and I was able to get $600 million approximately off those planes,” Trump said. “So I think that was a great achievement, but that really means much more than that if you think about the fact that that’s 90 planes out of close to 3,000 planes that are being ordered.”
Trump also suggested that Boeing, which makes the F/A-18 Super Hornet, could be competing with Lockheed on future fighter jet orders.
“Now they’ll be competing during the process for the rest of the planes, because there are thousands of more planes coming,” he said.
But one analyst said Trump is taking credit for savings that had been expected long before he took office. The Joint Program Office announced in December that it expected the cost of a plane in the 10th lot to be about 6 to 7 percent less than the 9th lot. Richard Aboulafia, vice president of analysis at the Teal Group Corporation, said Trump looked at that unit cost decrease that was previously announced by the Pentagon, multiplied that by the number of planes being purchased in this lot and then took credit for the price difference.
“It’s not a lie, it’s an alternative fact,” Aboulafia said. “Basically for quite some time now, you’ve seen costs come down as experience is learned and the numbers [of planes purchased] go up.
“His primary audience here is for people who don’t have access to the Internet, a group of folks who are willing to take his claims at face value, no matter how patently ridiculous. For quite some time now, we’ve had budget numbers for the future and they show a cost reduction curve, just like any defense program,” he continued.
Another expert, however, said the involvement of the president in negotiations may have played some role in both getting some savings and speeding up contract negotiations.
“The facts are that it took 12-15 months to negotiate lot 9 … and significantly less time for lot 10,” retired Lt. Gen. David Deptula, the dean of the Mitchell Institute for Aerospace Studies, said in an email. “Time is money and that may have played a role as well. Bottom line is, it looks like a combination of expected cost reduction accelerated by the engagement of the president.”
The Pentagon awarded $6.1 billion contract for the ninth batch of 57 low-rate initiation production aircraft in November after Lockheed and the department failed to reach an agreement to award contracts for lots nine and 10 together, though negotiations for the two lots were ongoing simultaneously. The price of the lot 10 contract has not been released.
Trump has repeatedly criticized the F-35 program for its “out of control” costs and received a promise from Marillyn Hewson, Lockheed Martin’s CEO, to work to reduce costs as much as possible.
In a statement, Lockheed said “We appreciate President Trump’s comments this morning on the positive progress we’ve made on the F-35 program. We share his commitment to delivering this critical capability for our men and women in uniform at the lowest possible cost to taxpayers.”
A spokesman for the F-35 Joint Program Office did not immediately return a request for comment to confirm the number.
On Friday, Defense Secretary Jim Mattis ordered a review of the program, which will separately assess whether an advanced version of the Super Hornet can provide “a competitive, cost effective, fighter aircraft alternative” to the F-35C, which is the Navy version.
Hewson told investors last week that each aircraft in the 10th lot, which is expected to include about 90 planes, will cost less than $100 million per plane. That represents a 60 percent drop in cost from the first lot of aircraft, a natural result of manufacturers learning as they go and increasing efficiencies.
Hewson also commended Trump for his interest in the program.
“He asks excellent questions and he’s really focused on making sure that the cost comes down on the program,” Hewson said in a call to report the company’s 2016 fourth quarter earnings. “It’s not about slashing our profit, it’s not about our margins. When we have those discussions, it’s about how do we get the cost of the aircraft down today and in the future.”
The cost per plane has gone down in each lot as those building it learn lessons that make future work go more quickly and more smoothly. The cost also goes down as the service buys more planes since the one-time costs of production are spread between more platforms.
The program is the most expensive ever undertaken by the Pentagon, at a cost of about $1 trillion, though that number covers the entire life cycle of the platform.
