Pentagon, Lockheed Reach Final Agreement on F-35 Part Refunds

(Bloomberg) -- Lockheed Martin Corp. and the Pentagon's contracts management agency reached a formal agreement that the company will provide about $71 million in services for the F-35 jet program as compensation for delivering aircraft parts that weren't ready for installation.

The Defense Contract Management Agency and the No. 1 defense contractor reached the previously undisclosed accord Jan. 12 over F-35 parts delivered from 2015 to early 2020 without electronic data that personnel need to track components' history and remaining service life.

“We appreciate the partnership” with the agency and the F-35 Joint Program Office as “we remain focused on increasing F-35 readiness while driving down sustainment costs,” Lockheed Martin spokesman Brett Ashworth said in a statement.

The settlement is a victory for congressional oversight of the Pentagon's costliest program. The refund action was initiated under a provision in the fiscal 2020 defense policy bill that was sought by the House Armed Services Committee after the Pentagon's inspector general exposed the problem in a 2019 audit. This year's defense spending bill includes a provision requiring the Pentagon to outline the settlement details in the upcoming fiscal 2022 budget.

The parts in question were considered inadequate for installation solely because of the lack of data, not due to safety or manufacturing flaws.

As part of the settlement the contracts management agency recognized $36.3 million in private investments Lockheed previously made to improve performance metrics. Of the remaining $34.3 million, Lockheed agreed to invest at least $24.3 million through 2026 “to benefit the F-35 enterprise” and spent $10 million spent on standardizing records to improve sustainment operations, said agency spokesman Matthew Montgomery.

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