The Pentagon estimates that the first three production lots of the F-35 are exceeding cost projections by up to 15%, nearly $1 billion, most of which will be paid for by the government.

The total estimated overrun for the 28 single-engine, stealthy fighters in those three production lots is $918 million, according to Joe Dellavedova, spokesman for the Joint Strike Fighter program office. Contracts for these aircraft were cost-plus arrangements, placing much of the burden for overruns on the government.

The U.S. intends to pay for $635 million -- or 70% -- of the projected overage while Lockheed Martin and engine maker Pratt & Whitney, the F-35 lead contractors, will pay for the remaining $283 million by "reducing their target fee," Dellavedova says. He adds in a written statement that another $136 million will be required "to modify early production aircraft to attain useful service life capabilities. F-35 concurrency is generating significant change that both perturbs the learning cost reduction and adds costs for modifying delivered jets."

Lockheed Martin spokesman Michael Rein says these numbers are "still being scrubbed and are the worst-case scenario." The company, he says, is "working hard to lower it."

However, the joint program office is keeping the pressure on the contractor team about price. "Going forward, controlling costs is an absolute must," Dellavedova says.

A multibillion-dollar restructuring implemented this year was designed to reduce risk from the testing plan and slow the production ramp up in hopes of avoiding future concurrency problems.

Including the so-called "concurrency modifications" ($136 million), the total overage for those aircraft on Lots 1-3 is $1.05 billion. These new costs will be reflected in a revised cost report, called a selected acquisition report (SAR), going to Congress in the fall. Prior to release of that report, Pentagon procurement chief Ashton Carter will review the program in a formal Defense Acquisition Board meeting.

As of late last year, the targeted per-unit prices for low-rate initial production lots 1-3 are as follows for the conventional-takeoff-and-landing (CTOL) F-35A; the short-takeoff-and-vertical-landing (Stovl) F-35B and the F-35C carrier version:

* LRIP 1 -- CTOL: $221.2 million

* LRIP 2 -- CTOL: $161.7 million; Stovl (first purchase) $160.7

* LRIP 3 -- CTOL: $128.2 million; Stovl $128 million.

Meanwhile, Lockheed Martin has begun Lot 4 production under its first fixed-price contract with the Pentagon. Under this arrangement, the government and contractor team equally share the price of overruns up to 120% of the target price; any overage beyond that is the responsibility of the contractor.

Negotiations are under way for another fixed-price contract for Lot 5.

The government also is conducting a "should-cost" review of the F-35 leading up to finalizing that contract.

Photo: Lockheed Martin