Trump Victory Complicates Lockheed Martin’s F-35 Contract Dispute

During his presidential campaign, President-elect Donald Trump made clear his misgivings over Lockheed Martin’s F-35 program.  During an interview on the Hugh Hewitt radio show, Mr. Trump asked “[w]hen they say that [the F-35] cannot perform as well as the planes we already have, what are [we] doing, and spending so much money?” Mr. Trump continued: “I do hear it’s not very good. I’m hearing that our existing planes are better. And one of the pilots came out of the plane, one of the test pilots, and said this isn’t as good as what we already have.”

Mr. Trump’s words echo the concerns of Senator John McCain, who recently stated that

"the decision to produce hundreds of aircraft, on a cost-plus basis, before the technology is developed and completed, and to do all of this, lot after lot, without an actual contract in place between the government and industry, is the height of acquisition malpractice."

Mr. Trump’s concerns add yet another wrinkle to a complicated contract dispute.  Recently, after years of negotiations, the Department of Defense announced a unilateral decision that it would pay $6.1 billion for the next 57 copies of the F-35 without Lockheed’s approval. Reportedly, the contract negotiations broke down based upon Lockheed’s cost data submitted to explain the cost of building the F-35. On Nov. 4, 2016, four days before the election, Lockheed announced that it would challenge the Pentagon over the $6.1 billion award either to the Armed Services Board of Contract Appeals or the Court of Federal Claims.  The company has 90 days to decide how to proceed.

In the meantime, Lockheed is in conversations with President-elect Trump’s transition team.  It remains to be seen whether Mr. Trump will maintain his past criticism of the F-35 program or whether he may strike a more conciliatory tone after the inauguration. Needless to say, Lockheed’s strategy with regard to its appeal of the $6.1 billion contract will depend upon how Mr. Trump’s appointed Secretary of Defense views the F-35 program.