Air Force Cautions Trump Team on Defense Costs

By Doug CameronDefenseDow Jones Newswires

The U.S. Air Force general in charge of the F-35 fighter jet program disputed President Elect Donald Trump's contention that costs have run out of control, saying the days of price and schedule overruns in development of the new fighter jet largely ended in 2011.

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Air Force Lt. Gen. Chris Bogdan on Monday cheered Mr. Trump's emphasis on cutting waste in defense spending, but disputed the president elect's characterization of the program. He said that since a 2011 reboot of the program, it had basically been on time and on budget.

"The program is not out of control," Gen. Bogdan said in a media briefing a week after Mr. Trump took aim at the fighter-jet program.

The Pentagon plans to buy more than 2,400 of the planes to replace many of its combat jets, but they are entering service years late -- and purchase costs doubled to almost $400 billion because of earlier design and production problems. Including operating expenses, the bill is estimated to top $1 trillion over the next 50 years.

"I have no doubt that given the controversy in the F-35 program over the years that there is a perception that this program is out of control," Gen. Bogdan said. "The first F-35s cost twice as much as we thought they were going to. That's in the past."

He said he hoped to talk to the new administration, lay out the facts and let them make their own judgment on whether the course-correction was effective.

Separately, the civilian head of the U.S. Air Force said earlier Monday that the incoming administration may find it tougher than they expected to bring down the cost of big military programs such as the F-35.

"It's not quite as easy as it seems to get these costs down," Air Force Secretary Deborah Lee James said during an event organized by the Atlantic Council, a think tank.

Ms. James said she and other Pentagon leaders had briefed members of the transition team in recent weeks, and said its understanding of Air Force requirements and the complexity of the buying process would continue to develop. She added some members of the team are still in the process of securing the security clearances needed to assess programs.

Gen. Bogdan said his team hadn't met transition officials, but said costs could be cut further beyond ongoing efforts that reduced the latest per-plane price of the model used by the Air Force to $102 million.

"Our job is to give the new administration the good, the bad and the ugly about this program." he said. "I'm not a salesman for the F-35."

The Trump transition team didn't immediately respond to requests for comment.

Gen. Bogdan said the capabilities of the plane -- which can evade sophisticated radar and act as a flying command post -- should not be reduced to cut costs.

"We know what this airplane needs to do to keep us safe," he said.

Lockheed and other suppliers such as Northrop Grumman Corp. and BAE Systems PLC are already investing to reduce production costs, and Gen. Bogdan said more competition between suppliers and multiyear purchases of the plane to generate economies of scale were two avenues to explore further.

International buyers of the plane -- which include the U.K., Israel and Japan -- are already discussing such a block purchase, as is the Pentagon, which currently buys a number of planes on an annual basis.

Lockheed remains embroiled in an unusual battle with the Pentagon over what the government is willing to pay for F-35 jet fighters.

The Pentagon last month ended more than a year of talks with Lockheed and said it was imposing a new $6.1 billion deal for the next batch of 57 planes that start delivering next year.

The core of the impasse is the Pentagon's take on how much the jets cost to build and how much profit is afforded to Lockheed, said a spokesman for the F-35 program office. After months of efforts to hammer out a deal covering two years of production, the Pentagon decided that further talks wouldn't lead to a mutual agreement.

Lockheed has said it was disappointed by the move and committed to continuing work on the program. It has also said it may take the Pentagon to court to secure a new deal.

The company said in the wake of Mr. Trump's comments last week that it welcomed the opportunity to address any questions the president-elect has about the program.

Some defense analysts said they didn't expect Mr. Trump's interventions to have a long-term impact on company earnings, even though the shares of some fell sharply last week in their wake.

"We don't think that the F-35 contracts will be rewritten, that [Lockheed] and its subcontractors will be mandated to accept lower margins, nor do we expect the program to be canceled," Richard Safran at Buckingham Research said in a note to clients.

Separately, Ms. James, the Air Force secretary, said existing restrictions on Pentagon staff working for industry were already "pretty strong," and noted that she would have a two-year ban on working for military contractors when she leaves office. Ms. James is a former executive at Science Applications International Corp.

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