The Pentagon is withholding approximately $5 million from manufacturer Lockheed Martin for each F-35 stealth fighter delivered that is equipped with an unfinished upgrade, as revealed today by the F-35 Joint Program Office (JPO).
This figure marks the first official amount disclosed by the Pentagon regarding the delay of a crucial upgrade to the fifth-generation fighter. Lockheed cannot collect this money until the full upgrade is completed, which is expected sometime next year.
Deliveries of jets had been frozen for an entire year due to ongoing issues with an upgrade known as Technology Refresh 3 (TR-3). The Pentagon resumed accepting F-35s outfitted with this enhancement in July. However, officials stated that payments would still be withheld for upgraded planes since TR-3 is not complete. Currently, TR-3 jets are allocated solely for training purposes, and a subsequent software patch to enable full combat capability is expected next year, although the exact amount of withheld payments remains unclear.
According to a JPO spokesperson, the total withholding is approximately $5 million per aircraft, which “is being withheld and will be released as combat capability is delivered.” The Pentagon has remained tight-lipped about how many aircraft have been affected by the delivery freeze and did not disclose the total number of jets involved.
Lockheed has stated that the delivery freeze has not impacted F-35 production, maintaining a rate of 156 jets per year. The company has also indicated in previous financial disclosures that it anticipates delivering “between 75 and 110 aircraft in the second half of 2024, primarily in the TR-3 configuration.” (Jets produced in the TR-2 configuration were not affected by the delivery halt.)
Today’s announcement from the JPO noted that the Pentagon and Lockheed “have reached an agreement for the acceptance and delivery of Technology Refresh 3 (TR-3) enabled aircraft with robust combat training capability,” building on an “initial training capability” established when deliveries resumed in July. The JPO could not explain the differences in capabilities by press time.
The TR-3 upgrade essentially provides the necessary hardware and software to support a new suite of capabilities known as Block 4. Initially expected in April 2023, the TR-3 initiative is now approximately $1 billion over budget, leading Lockheed to forfeit around $60 million in associated fees.
Once the TR-3 upgrade is finalized, the withheld funds will be released, though the specifics of this disbursement process remain unclear. During a discussion with reporters on the sidelines of a ceremony unveiling Poland’s first F-35, the president of Lockheed’s aeronautics division, Greg Ulmer, remarked that the TR-3 software required to enable full combat capability is still on schedule for delivery in 2025.
Testing Enhancements
Officials have previously cited deficiencies in testing infrastructure as part of the explanation for the issues surrounding TR-3, prompting lawmakers on the House Armed Services Committee (HASC) to advocate for procurement cuts in favor of increased testing investments. According to Rep. Rob Wittman, a Republican from Virginia who chairs the HASC tactical air and land forces subcommittee, those funds could be redirected to features like an “integrated software laboratory” and the creation of a “digital twin” of the fighter.
Notably, in its statement today, the JPO indicated that “Lockheed Martin and its industry partners are making significant investments in development labs and digital infrastructure that benefit the F-35 enterprise’s speed and agility in deploying capabilities to the most advanced and connected fighter jet.”
When asked for additional information by Breaking Defense, Lockheed stated that the company “is collaborating with its F-35 industry partners to invest in enhancing capabilities and driving efficiency across the F-35 enterprise. Over the next five years, Lockheed Martin is investing well over $350 million to benefit the F-35 enterprise.”
