UPDATE 1-Cost of Lockheed’s F-35 fighter soars

* Cost/plane seen over 50 pct higher than nine years ago

* Cost growth comes despite efforts to reform program

* Air Force to formally notify Congress, begin review
(Adds details, quotes, background)

By Jim Wolf

WASHINGTON, March 11 (BestGrowthStock) – The average cost of
Lockheed Martin Corp’s (LMT.N: ) F-35 Joint Strike Fighter, the
Pentagon’s costliest purchase ever, will be over 50 percent
higher than projected when the program began nine years ago,
the Pentagon’s top arms buyer told Congress.

The U.S. Air Force is about to formally notify Congress
that the program has crashed through a key cost-containment
threshold that will force a thorough review, Ashton Carter,
undersecretary of defense for acquisition, said on Thursday.

The cost blowout has occurred despite a recent
restructuring aimed at keeping the program on track.

“The JSF program has fallen short on performance over the
past several years,” Carter told the Senate Armed Services
Committee. He said the Defense Department planned to
“aggressively manage” it over coming years as it goes from
development and testing toward full production.

Affordability was supposed to be a hallmark of the F-35,
which is being built in three versions for the U.S. Air Force,
Navy and Marine Corps; eight overseas co-development partners
and other projected foreign buyers.

Senator Carl Levin, chairman of the committee, said the
cost growth could have significant implications for the rest of
the Pentagon’s multibillion-dollar acquisition programs and for
its budget as a whole. The United States alone is scheduled to
buy more than 2,400 F-35s, the backbone of its air combat fleet
for coming decades.

“People should not conclude that we will be willing to
continue… strong support without regard to increased costs
coming from poor program management or from lack of focus on
affordability,” the Michigan Democrat said in an opening
statement.

Carter said he expected Air Force Secretary Michael Donley
to formally notify Congress of the cost-containment breach
under the so-called Nunn-McCurdy law within days.

If unit cost growth tops 25 percent, Nunn-McCurdy requires
the Pentagon to justify continuing the program based on three
main criteria: its importance to U.S. national security; the
lack of a viable alternative; and evidence that the problems
that led to the cost growth are under control.

In 2001, when the program began, the average F-35
procurement cost had been projected to be $50.2 million per
aircraft in base-year 2002 dollars.

Pentagon estimators, based on a projected procurement of
2,443 aircraft, including all variants, now expect the average
price to fall in a range of $80 million to $95 million in 2002
dollars, said Christine Fox, director of cost assessment and
program evaluation for Defense Secretary Robert Gates.

Lockheed Martin had no immediate comment.

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(Reporting by Jim Wolf; Editing by Tim Dobbyn)

UPDATE 1-Cost of Lockheed’s F-35 fighter soars