An F-35A takes off from Edwards Air Force Base, California, on January 6, 2023. A developmental test team from the 461st Flight Test Squadron conducted the first flight of an F-35 in the Technology Refresh 3 (TR-3) configuration at the base. U.S. Air Force
Lockheed won’t get paid in full yet for upgraded F-35s, even as deliveries resume
The jets are being shipped with incomplete software, so the Pentagon is withholding part of its payment.
RAF FAIRFORD, England—The Pentagon is withholding money from Lockheed Martin because the full upgrade for the latest version of the F-35 fighter jet isn’t ready, even though deliveries have restarted.
On Friday, Lockheed resumed deliveries of the Technology Refresh-3 variant of the F-35, one year after the Pentagon stopped accepting jets with the balky upgrade. Under an agreement concluded earlier this year, the new jets are being delivered with incomplete TR-3 capability—and Lockheed is getting only part of the payment.
“There are still withholds. Since not everything that we contracted for has been delivered, the payment is also not complete. We will not pay for that which we have not received,” Andrew Hunter, the service’s acquisition chief, told reporters at the Royal International Air Tattoo on Saturday.
Just how much is being withheld from each plane’s up-to-$100 million price tag? Hunter would say only that Pentagon and Lockheed officials had come to a “satisfactory arrangement.”
The Joint Program Office did not respond for comment at the time of publication.
During the year-long halt of TR-3 deliveries, the Pentagon withheld $7 million per jet, which has quickly added up for Lockheed since around 100 aircraft were stacking up at the company’s facilities, waiting to be delivered.
“There are financial incentives and they are being used. I don't think Lockheed’s trying not to deliver,” Air Force Secretary Frank Kendall told reporters. “It's inherent in the program that they want to get this done. Their sales depended upon it. But we are using financial incentives to strengthen that a little bit.”
Since officials argue that a part-capability is better than nothing, F-35 customers have agreed to accept jets with an interim “truncated” version of the TR-3 package, with full TR-3 capability likely a year away.
The hardware piece of TR-3 is finally coming online but the software is lagging, Kendall said, so they’re accepting aircraft knowing that additional increments of software will be added in the future.
“But there’s been debate going on for some time about how much progress and how much risk we're willing to take in that equation, and I think we're at a reasonable place right now,” Kendall said.
Asked about the withholding, Lockheed officials didn’t comment but pointed to a recent 8-K form they issued yesterday, which says they expect to deliver between 75 and 110 aircraft in the second half of 2024. Those will primarily be of the TR-3 version, in a combo of the stacked-up jets and fresh ones off the production line.
“We are working with the JPO on the terms and conditions related to the timing of the final payments for TR-3 configured aircraft and a phased approach to delivery,” the company said.