Trump’s Boasts Aside, Here’s the Real Reason Those F-35s Wound Up Costing Less
(Source: Project On Government Oversight; issued Feb 09, 2017)
WASHINGTON --- Lockheed Martin’s deal to sell a new round of F-35s at a reduced cost to the Pentagon had little to do with President Donald Trump despite the commander in chief’s boasts to the contrary.

The company, one of Fort Worth’s largest employers, had planned for months to sell the fighter jets for under $100 million apiece, and both supporters and detractors of the most expensive weapons program in the nation’s history say Trump has done little to mitigate costs beyond public statements and social media posts.

Trump, who loves to riff about cajoling Fortune 500 CEO’s into doing his bidding, has now positioned himself as the savior of the F-35 fighter jet program run by Lockheed, a past Twitter target.

“I have already saved more than $700 million when I got involved in the negotiation on the F-35. You know about that,” Trump said on Monday at MacDill Air Force Base in Tampa, Florida. “And I want to thank Lockheed Martin. And I want to thank Boeing. And I want to thank all of the companies that have really opened up. Opened up and cut their prices.”

But, in reality, the F-35 is years removed from a half decade of the well-publicized cost overruns in the mid-2000s.

“Some people call it alternative facts, I call it just flat-out exaggeration,” said Rep. Marc Veasey, a Fort Worth Democrat who supports the F-35 program.

“These cuts were already set to be put in place before Donald Trump even became president, and people have been talking about the costs of the F-35 for quite some time,” Veasey said. “The only thing Donald Trump did was spread fear and uncertainty through Fort Worth and cost the company billions of dollars when he made the stock prices go down.”

Lockheed's F-35 and the Legacy of Air Supremacy

Just days before the November 2016 election, the Pentagon issued a $6.1 billion “unilateral” contract for 57 of the F-35 aircraft, an agreement that locked in Lockheed’s profit margin for a portion of the massive program.

Lockheed disagreed with that decision because the government was able to set Lockheed’s margins without the company’s consent. That November contract decreased the cost per plane by 3.7 percent to just over $107 million per plane.

“The atrocity is not that he’s (Trump) taking credit for numbers already on paper, it’s that he’s taking credit for people who did really hard work that he would like to fire,” said Richard Aboulafia, a military aircraft analyst with Teal Group, a Northern Virginia based aeronautics analysis firm.

The recent $600 million cuts to the latest F-35 contract are a product of increased orders for the planes. The cuts have been anticipated for years as Lockheed ramps up production.

A White House spokeswoman did not respond to a request for comment.

The recent $600 million cuts to the latest F-35 contract inked by Lockheed are a product of increased orders for the planes, meaning that more demand drives down the unit cost per aircraft, and the cuts have been anticipated for years as Lockheed ramps up production.

The planes aren’t just being delivered to the United States. Israel received its first shipment of F-35s in December 2016, and 11 countries are involved in building and testing the aircraft.

Lt. Gen. Chris Bogdan, who heads the F-35 Joint Program Office at the Pentagon, said in December to Breaking Defense before the cuts were announced and Trump took office that he expected the newest order for planes “to come down in price significantly ... probably somewhere on the order of six to seven percent.”

The announced $600 million cuts fall in the six- to seven-percent ballpark Bogdan predicted in December.

Lockheed is playing ball with Trump’s recent declarations, saying in a statement last week that “President Trump’s personal involvement in the F-35 program accelerated the negotiations and sharpened our focus on driving down the price. The agreement was reached in a matter of weeks and represents significant savings over previous contracts. This is a good deal for the American taxpayer, our country, our company and our suppliers.”

And Lockheed CEO Marillyn Hewson announced after meeting with Trump in January that 1,800 jobs will come to Fort Worth in the coming years.

“We had the opportunity to talk to him about the F-35 program and I certainly share his views that we need to get the best capability to our men and women in uniform and we have to get it at the lowest possible price,” Hewson told reporters after her meeting in Manhattan.

Texas Republican Rep. Kay Granger, a strong advocate of the F-35 program whose Fort Worth district holds the factory that assembles the fighter jet, was unavailable for an interview but in a statement also praised Trump’s role in the negotiations.

“A lower-cost F-35 is a win for American taxpayers and for all of our allies and partners around the world who count on this fifth-generation fighter for their national defense,” Granger said in a statement. “I am pleased that the administration and Lockheed Martin came together on an agreement, and I remain proud of the talented workers who live in the 12th District and make the equipment that keeps us safe.”

Members of Trump’s party and the companies who rely on federal contracts are playing it safe, said Dan Grazier, a fellow at The Project for Government Oversight, a government watchdog group that opposes the F-35.

“Trump is looking for a bunch of quick victories,” Grazier said. “It’s extremely doubtful that Trump had anything to do with cost decreases. Lockheed had been talking about price reductions to the F-35 for months before election.”

Grazier remains skeptical of the F-35s long-term viability, arguing that completed F-35s will exceed current costs because they will need to be sent back to the factory to be finished when research and development is completed. However, he acknowledged that the cost per plane has decreased as more are built.

“This has been going on for a solid year, almost a solid year before Donald Trump really jumped into the fray on this program,” Grazier said.

But there is one way Trump could impact the F-35 and take credit: lift federally mandated spending caps, known as sequestration, that limit military spending.

“Back in 2013, we had about 1,000 employees laid off at Bell Helicopter because of the sequester,” Veasey said. “If you really want to start advocating for bringing down the price, I think the one thing that the president can do and take credit for is to get rid of the sequester.”

“They (Republicans) control the presidency, control the House, control the Senate, they have the ability to get rid of the sequester and bring even more jobs to Lockheed,” Veasey said. “It doesn’t seem like there’s any movement on that. I’m on the armed services committee and we talk how we can save money on a variety programs, but no one’s talked about the sequester.”

How the Pentagon buys F-35s

The Pentagon buys F-35s in batches and negotiates with Lockheed on a total price for each batch. As Lockheed ramps up production, the cost per plane goes down.

In November, Lockheed was forced to agree to a $6.1 billion contract for ninth batch of 57 F-35 fighter jets in a unilateral contract agreement, putting the price per plane at just over $107 million.

In January, Lockheed agreed to a deal for the 10th batch of F-35s for a cost of less than $100 million per plane.

There are three variants of the F-35 for each branch of the armed forces. The conventional version of the F-35 the Army uses is cheaper than the F-35s ordered by the Marines and Navy, which have additional capabilities for vertical landings and landing on aircraft carriers.

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