F-35 performance-based logistics deal is dead—for now

Lockheed Martin and Pentagon officials are back to negotiating a traditional F-35 sustainment contract after the company failed to convince its largest customer to move to a five-year performance-based logistics deal that, company officials say, would boost availability and save money. 

Under the proposed firm-fixed-price deal, Lockheed would have assumed management of the jet’s entire supply chain, including the financial risk, in return for a guaranteed half-decade of work. But they could not convince defense officials that the proposed arrangement would save money or increase readiness. 

So the F-35 Joint Program Office is “currently negotiating the next annualized sustainment contract with yearly options between 2025-2028. The Department will continue to assess and seek to award the best contracting strategy for F-35 sustainment, to include PBL-type arrangements where advantageous,” according to a Defense Department spokesperson. 

Program officials are exploring whether performance-based logistics might make sense for some rather than all F-35 sustainment work, Pentagon acquisition chief Bill LaPlante told reporters Thursday at the NDIA Emerging Technologies for Defense conference.

“Are there subsets of a full PBL that could make more sense? In other words, not do PBL for the entire system, but do a PBL for this part or this part? But the overall goal of going to a system PBL, we're not giving up on that. It's just, when can we get there?” LaPlante said. 

The Pentagon might have backed away from the deal out of concern over whether the PBL model, or the contractor, could actually handle sustained, high op-tempo flying, said Jon Hemler, a military aerospace analyst with Forecast International, a corporate sister to Defense One. Additionally, the Pentagon might not want to commit to a single supplier, he said.

“Lockheed Martin F-35 delivery delays due to software issues, aircraft readiness rates, and the DOD’s general need to diversify its supplier support network are all certainly playing a role in the minds of decision-makers,” Hemler said. 

The proposal originally received from Lockheed wouldn’t have saved enough money or guaranteed enough readiness, LaPlante said in December. Under the 2022 National Defense Authorization Act, the Pentagon must prove that a PBL would do both before it can sign the deal.

The JPO and Lockheed struck a six-month deal earlier this year to keep sustainment going through the end of the year, and now is negotiating the next annual contract. 

Asked about the state of PBL negotiations, Lockheed said, “We remain committed to partnering with the Joint Program Office on delivering mission-essential and effective sustainment support for the F-35 program now and in the future.”