Pentagon to release funds after full TR-3 upgrade completion

The Pentagon is withholding approximately $5 million from Lockheed Martin for each F-35 stealth fighter delivered with an incomplete upgrade, as revealed by the F-35 Joint Program Office (JPO). 

The Pentagon has announced it will withhold approximately $5 million from Lockheed Martin for each F-35 stealth fighter delivered with an incomplete upgrade, as revealed by the F-35 Joint Program Office (JPO) today. This disclosure marks the first official financial figure related to delays in a crucial upgrade for the fifth-generation fighter. Lockheed cannot access these funds until the upgrade is fully implemented, which is projected to be completed next year, Caliber.Az reports, citing foreign media.

Following a one-year halt in F-35 deliveries due to issues with the Technology Refresh 3 (TR-3) upgrade, the Pentagon resumed accepting jets equipped with this enhancement in July. Despite this, payments for these upgraded aircraft are still being withheld because TR-3 is not yet finished. The jets currently delivered are being used for training purposes, with a future software update anticipated to enable full combat capability next year. The exact number of affected jets and the total amount withheld remain undisclosed.

A JPO spokesperson confirmed that approximately $5 million per aircraft is being withheld and will only be released once the full combat capability is delivered. Although Lockheed Martin's production rate of 156 jets per year remains unaffected by the delivery freeze, the company has reported it expects to deliver between 75 and 110 aircraft in the latter half of 2024, mostly in the TR-3 configuration. The JPO also mentioned that an agreement has been reached with Lockheed for the acceptance and delivery of TR-3 enabled aircraft, which will offer enhanced combat training capabilities compared to the initial training capability available when deliveries resumed in July. 

The TR-3 upgrade, which was initially slated for completion in April 2023, is significantly over budget by about $1 billion, leading Lockheed to forfeit approximately $60 million in associated fees. Once the TR-3 upgrade is completed, the withheld funds will be released, although the specifics of how these payments will be processed remain unclear. On Wednesday, Greg Ulmer, Lockheed Martin's president of aeronautics, stated that the TR-3 software required for full combat capability is expected to be delivered by 2025, during a press event marking the unveiling of Poland's first F-35. 

The challenges with the TR-3 upgrade have been partly attributed to deficiencies in testing infrastructure, which led the House Armed Services Committee (HASC) to support procurement cuts in favor of investing more in testing. Rep. Rob Wittman, a Virginia Republican and chair of the HASC tactical air and land forces subcommittee, suggested that these funds could be used to develop an “integrated software laboratory” and create a “digital twin” of the fighter jet. In response, the JPO highlighted that Lockheed Martin and its partners are making substantial investments in development labs and digital infrastructure, which will enhance the F-35's speed and agility. Lockheed Martin confirmed that it is investing over $350 million over the next five years to improve capabilities and efficiency within the F-35 program. 

Following this report, Wittman expressed optimism about the Pentagon's acceptance of TR-3 F-35 aircraft and the reduction of the aircraft backlog over the coming year. He also welcomed Lockheed Martin's investment in digital technology and their efforts to address recommendations from the independent review team. While acknowledging these positive developments, Wittman emphasized that there is still significant progress needed before delivering the Block 4 capabilities.