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Pentagon Criticizes Contractors’ Fighter Costs

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From Bloomberg News

Lockheed Martin Corp. and Boeing Co. have yet to persuade the Defense Department that they can contain the costs of the most expensive aircraft program ever, the Joint Strike Fighter, Pentagon documents suggest.

“Chronic cost performance concerns” prompted U.S. military officials to give the weapons project, currently under design, the worst of three possible cost ratings in two reviews since January, the Pentagon said. The document, prepared last month, didn’t spell out specifics because of “the proprietary, sensitive nature of the cost performance data.”

The review suggests No. 1 defense contractor Lockheed and No. 2 Boeing, rivals for JSF contracts that could run to $300 billion over 20 years, face increased pressure to rein in costs over the next several years or see the Defense Department kill the program.

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Legislators are already debating whether the U.S. can afford three types of fighters--the JSF, Lockheed’s F-22 and Boeing’s F-18 E/F. The House of Representatives cut $1.8 billion in fiscal 2000 F-22 procurement funds and said the JSF can be redesigned to meet its mission at less expense.

JSF program plans envision building about 3,000 aircraft for the U.S. Air Force, Navy and Marine Corps and Britain’s Royal Navy. Lockheed and Boeing will start flying prototypes next year, and one company will be selected in 2001 to enter full-scale development and production.

The program ultimately could help U.S. and foreign militaries contain fighter costs because 80% of the plane’s parts and design could be used by the various services and foreign customers.

The Defense Department is paying all costs associated with the JSF early development contracts and says it will not tolerate costs above the basic $700-million contracts Boeing and Lockheed each are receiving.

United Technologies Corp.’s Pratt & Whitney engines unit is developing the JSF F119 engine under a $832-million contract.

In April, Pentagon officials directed Lockheed and Boeing to submit a new plan to eliminate projected cost overruns. Both contractors and the Pentagon’s JSF program office say they have an effective system to warn of problems.

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Boeing and Lockheed Martin officials said they are confident they can rein in costs.

In New York Stock Exchange trading, Boeing shares rose 6 cents to close at $44.38, and Lockheed shares fell 44 cents to close at $38.25.

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