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Pentagon to Delay Lockheed Payments

Fees Tied to Joint Strike Fighter Goals

By Ellen McCarthy
Washington Post Staff Writer
Wednesday, December 29, 2004; Page E05

The Pentagon will delay $283 million in potential payments to Lockheed Martin Corp. on the Joint Strike Fighter to push the company to meet goals on the program.

The new schedule established by the Pentagon in early December calls for 20 percent of the award fees, or bonus payments, previously scheduled to be paid to Lockheed between 2004 and 2007, to be paid instead between 2008 and 2013. Award fees are incentives for the contractor to meet or exceed goals and typically account for a majority of a company's profits.


The Joint Strike Fighter program has fallen behind schedule partly because the military changed the requirements. (Lockheed Martin Photo Via AP)

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The $244 billion Joint Strike Fighter program, the largest in Pentagon history, has faced delays and cost increases as Bethesda-based Lockheed worked to lower the weight of the aircraft and the military changed some of the requirements.

"We wanted to put the best possible plane out there," said Cheryl Limrick, assistant public affairs officer for the Joint Strike Fighter program at the Pentagon. "By shifting it, it keeps the incentive going for the contractor . . . for them to keep performing throughout the entire period."

The contract was awarded to Lockheed Martin in October 2001 and is potentially worth $19.4 billion. By June 30 of this year, $6.5 billion had been paid to the contractor, according to the Pentagon. The schedule shift, which extends the life of the contract through 2013 rather than 2012, does not change the value of the deal. The payment delay was reported by Bloomberg News on Monday.

Of the total contract, $2.7 billion would be paid in award fees. The company received 69.9 percent of its potential fee for the period ended April 20, 2004, but bounced back to earn 84.6 percent for the period ended Oct. 31. From the start of the program through the end of October, Lockheed Martin has collected $493.8 million of a possible $613 million in award fees, according to a Pentagon official.

Thomas C. Greer, a Lockheed Martin spokesman, confirmed that the shift had been made, but he declined to comment on the decision. "However, we continue to make good strong progress on the Joint Strike Fighter, as the aircraft is in development stages and is making its key performance parameters, and we expect to make continued progress in 2005," Greer said.


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