The maker of F-35 jets is getting paid for on-time delivery, even though it’s not delivering the aircraft on time and without the required upgrades, a government watchdog agency said.
“The F-35 program office compensated Lockheed Martin with hundreds of millions of dollars of performance incentive fees while the percentage of aircraft delivered late and the average days late grew,” according to a new report from the Government Accountability Office.
Both Lockheed and engine-builder Pratt & Whitney have received incentive fees, but the money has been “largely ineffective” at holding the contractors accountable, according to GAO. The structure of the incentives has allowed Lockheed to deliver F-35s “up to 60 days late” and earn some of the money.
“Unless the F-35 program re-evaluates its use of incentive fees and better aligns them to achieving desired production schedule outcomes, it will be at greater risk of continuing to reward contractors for delivering engines and aircraft late,” GAO said.
In a statement, Lockheed said it is “dedicated to meeting our customer requirements and delivering on our commitments. We are investing in mission-driven business and digital transformation to ensure we’re able to deliver capability at the speed of relevance.”
The report outlined fresh delays with the program’s Block 4 modernization effort and Technology Refresh 3 upgrade—the backbone of Block 4. The program has reduced the amount of capabilities it will deliver with Block 4 as costs have ballooned from $10.6 billion to $16.5 billion, according to an estimate from 2021. (GAO noted that the program does not have an updated cost estimate for Block 4).
The reduced set of Block 4 capabilities won’t be finished till 2031—5 years later than the program originally expected to finish the whole Block 4 effort, the report said.
“According to program officials, the new Block 4 major subprogram will have fewer capabilities, will experience schedule delays, and will have unknown costs until the program office finishes developing its cost estimate,” GAO said.
Specifically, the program will delay Block 4 capabilities that require an upgraded engine to work. The effort, called Engine Core Upgrade, was designed to improve the engine’s performance and provide the necessary power for Block 4, but the upgrade has been delayed and production for ECU won’t start until 2031, the report said.
The jet’s cooling system also needs to be upgraded to handle more cooling beyond Block 4, but production of that upgrade, known as PMTU, won’t start until 2033, the report said.
In order for Block 4 to work, the program has to finish TR-3—a $1.9 billion software and hardware upgrade that was supposed to be ready in April 2023. In June of this year, Lockheed executives announced the company had finished a combat-capable version of TR-3, but GAO said TR-3 won’t be fully ready until next year. GAO did say that the program plans to begin updating some F-35s with “limited” combat-capable software in July 2025.
“According to program officials, Lockheed Martin plans to begin delivering combat-capable aircraft with TR-3 that will enable Block 4 capabilities in 2026, a 3-year delay due to hardware and software issues,” GAO said.
Asked about GAO’s date for TR-3, Lockheed said it has completed all “TR-3 hardware and software configurations that support the TR-3 contract including design, build and testing.”
Chronic delays and cost overruns led the Pentagon to stop accepting new F-35s for a year—a pause that ended in July 2024. Since then, the Pentagon has been accepting TR-3 jets with a “truncated” version of the TR-3 package.
GAO attributed the TR-3 delays to problems with software stability, quality issues and late deliveries with the integrated core processor, and delays with a new suite of sensors, called the Next Generation Distributed Aperture System.
Program officials said the new core processor isn’t causing TR-3 delays anymore, but the new aperture system won’t be done until 2026, “making it a key driver for TR-3-enabled capability delays,” GAO said.
The F-35 program office did not respond to a request for comment in time for publication.
