Thompson on the F-35.

The latest production agreement represents an auspicious start to the Pentagon's big efficiency push, because the aircraft will be built for about 20 percent less than government estimators had expected under a fixed-price contract in which any cost overruns will have to be partly covered by the contractor. Government plans had called for commencing fixed-rate pricing later in the program, but the government elected to transfer risk to the contractor earlier in the production cycle, in return for which Lockheed Martin received incentives to surpass the performance to which it had committed. The company apparently felt confident it could meet or exceed government goals, based in part on the very positive test results being recorded for the Air Force variant of the plane in California.
The defense department expects to buy 2,443 F-35s in three different variants for the Air Force, the Navy and the Marine Corps. The sea-service versions will cost more than the Air Force variant because they are being bought in smaller numbers and incorporate special features such as the ability to take off and land vertically. Recent testing successes on the Air Force version are crucial to the program's success, since it represents over two-thirds of the planned domestic buy and is the main export variant. The Pentagon's Cost Assessment and Program Evaluation office stated earlier this year that all three variants of the plane were meeting key performance requirements and appeared to face no significant design challenges.

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