Pentagon Hyped $1.2 Billion F-35 Savings Claim, Senators Say

(Bloomberg) -- Senators have chided the Pentagon's F-35 program office for claiming $1.2 billion in purported savings from buying parts and equipment for Lockheed Martin Corp.'s fighter jet in bulk after an independent analysis found the benefit is likely to be half that.

Program office officials sought and won congressional approval last year to spend $661 million as a down payment on parts for 207 U.S. aircraft to be purchased in 2019 and 2020. The pitch was that this would save $1.2 billion for the U.S. and allies that buy the fighter, split evenly.

Officials testified to Congress last year that the estimated savings were validated by in-house evaluators, “an industry analysis and an independent assessment conducted by Rand Corp.” Bethesda, Maryland-based Lockheed was put on contract for the $661 million on June 8.

But an assessment by the Defense Department's Cost Assessment and Program Evaluation office, sought by Senate Armed Services Committee Chairman John McCain of Arizona, found the savings will total $600 million, including $300 million for U.S. aircraft.

‘Dismayed' by Inaccuracy

“While these savings are still significant,” the Senate Appropriations Committee, one of the four panels that approved the money, said in the report on its fiscal 2019 defense spending bill that it's “dismayed by the inaccuracy of the initial estimates.”

The committee wants the F-35 Joint Program Office to submit a report within 30 days of the spending bill becoming law explaining the different estimates and its plan to make up for any funding shortfalls. The Senate bill must be reconciled with the House Appropriations Committee version, which doesn't contain the criticism or the report requirement.

Despite the dispute over parts estimates, both funding panels treated the $406 billion F-35 acquisition program well. The Senate panel added $1.2 billion to speed the purchase of 12 fighters on top of the 77 the Pentagon requested. The House Appropriations Committee earlier added 16 F-35s in its version of the measure.

Joe DellaVedova, spokesman for the Pentagon's F-35 program office didn't have an immediate comment on the Senate panel's critique. He said in an email that the $661 million contract Lockheed received “is for funding the procurement of material and equipment that has completed formal hardware qualification testing.” The material will be used for jets purchased in the 13th and 14th contracts in 2019 and 2020.

DellaVedova said the program office supports the cost office's revised estimate. “The difference between the levels of projected savings is a function of programmatic changes and differing cost model assumptions.”

Buying parts in bulk “enables suppliers to maximize production economies of scale and will yield hundreds of millions of dollars in savings to the U.S. services and our international partners,” he said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert, Justin Blum

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