Gates sacks F-35 manager, withholds Lockheed payments

By Megan Scully

February 2, 2010

Frustrated with projected cost increases and schedule delays on the high-stakes F-35 Joint Strike Fighter, Defense Secretary Robert Gates announced Monday he has replaced the head of the program and is withholding $614 million from prime contractor Lockheed Martin Corp.

Gates made the announcement as he unveiled a $708.2 billion Pentagon budget proposal that includes $11.4 billion to buy 43 of the advanced fighters for the Air Force, Navy and Marine Corps and support continued research and development.

That $11.4 billion makes the F-35 the largest single weapons program in the new budget, even though they will buy nine fewer planes than had once been anticipated for fiscal 2011. Meanwhile, the military will continue to restructure the program to resolve problems that have plagued it for years.

During a Pentagon briefing, Gates said he believes the F-35 is on the right course, but added that he opted to withhold the performance fees because "the taxpayers should not have to bear the entire burden of getting the JSF program back on track."

Lockheed Martin agreed with the decision to withhold the fees, he said.

But Gates, who has never shied away from publicly sacking high-level defense officials, said the government was also responsible for the problems with the program.

"Accountability is not just about holding contractors responsible," he said. "The Department of Defense also bears responsibility for the JSF's troubling performance record."

The department ultimately plans to buy more than 2,400 of the planes to replace older fighters, including the Air Force's F-16s and the Navy's F-18s.

With Gates giving his brand of tough love to the F-35 program and other senior officials predicting only modest increases in defense spending for the next several years, a clear warning emerged from the Pentagon that years of belt-tightening lay ahead.

"Reforming how and what we buy continues to be an urgent priority," Gates said. "The department and the nation can no longer afford the quixotic pursuit of high-tech perfection that incurs unacceptable cost and risk, nor can the department afford to chase requirements that shift or continue to increase throughout a program's lifecycle."

The fiscal 2011 request includes $548.9 billion for the Defense Department's base budget -- an $18.2 billion, or 3.4 percent increase, over fiscal 2010 enacted levels. But with inflation factored in, real growth in the base budget is 1.8 percent, officials said.

Over the next four years, the Pentagon anticipates real growth in the defense budget to be roughly 1 percent. The Defense, Homeland Security and Veterans Affairs departments were excluded from President Obama's three-year discretionary spending freeze announced last week.

Pentagon Comptroller Robert Hale said department officials feel strongly that they need "modest, real growth" to train, equip and grow a military that is at war. But he added, they recognize the country's economic challenges.

"We can accommodate 1 percent annual growth in the short-term and still maintain the current forces, and we're doing it, frankly, to try to be mindful of a serious economic problem and make our contribution to that," Hale said.

Procurement accounts, the low-hanging fruit in the Pentagon budget, are not the only ones scrubbed for savings.

Hale urged Congress not to add a half-percent to the military pay raise -- an annual practice that costs the department $500 million. The administration requested a 1.4 percent pay raise for the troops, which is lower than recent memory but on par with the private sector, officials said.

Meanwhile, Gates said he wants to work with Congress on a way to get military healthcare costs under control. Lawmakers have repeatedly rejected efforts to raise premiums or co-pays, which have not been increased since 1995.

As he did last year, Gates did not propose raising co-pays because he did not want to be caught with a gaping budget hole if Congress blocked the increases.

"We certainly would like to work with the Congress in figuring out a way to try and bring some modest control to this program," he said.

By Megan Scully

February 2, 2010