JSF – Australia Industry Participation

Never far from controversy, the Joint Strike Fighter programme is facing pressures both from within Lockheed Martin, in terms of the delayed testing schedule, and those exerted on defence budgets by the global financial crisis. With the Joint Strike Fighter Technology Conference to be held in Melbourne in May, APDR reviews the value of the programme to Australian industry so far and examines emerging technologies and opportunities to expand the share of work as production ramps up.
The Lockheed Martin F-35 Joint Strike Fighter project is arguably the most ambitious, and certainly the most expensive, fighter programme in the history of the world. Around three thousand aircraft will be produced in three major variants; Conventional Take Off & Landing (CTOL), Carrier Variant (CV), and Vertical/Short Take Off & Landing (VSTOL). In the next decade it will enter service with all three US services and eight international customers, including Australia.
Likewise, industrial participation in the programme is very complex and the traditional ‘offset’ arrangements have been replaced by a multi-national industrial partnership, where work is allocated on a competitive basis. Like the aircraft itself, this arrangement has attracted a great deal of criticism and all of the partner nations have at some point expressed dissatisfaction with their share of the work.
Criticism notwithstanding, Australian companies have won between $175 million and $200 million worth of work in the System Design and Development (SDD) phase of the programme with, according to Lockheed Martin, the potential for up to $12 billion of work over the projected 30 year production life of the aircraft.
The rationale behind the industrial work-share plan is that the F-35 Joint Project Office (JPO) awards production contracts to the partner nations on a best value basis, with an overall share commensurate with the level of participation. In theory this drives down the cost of manufacturing each JSF and the benefit is shared by all partners.


When Australia joined the JSF programme it signed a Production Sustainment and Follow-on Development (PFSD) Memorandum of Understanding, allowing it access to the JSF Industrial Participation Plan. This plan is overseen by the JPO and Lockheed Martin as the prime contractor, and Australian companies had access to opportunities in the SDD phase of the programme as a result. Every six months this plan is reviewed in conjunction with the DMO’s New Air Combat Capability (NACC) office to track progress to date and to examine emerging opportunities.
According to Bob Price, Lockheed Martin’s F-35 Programme Manager for Australia and Canada, the SDD phase contracts with Australian firms will be worth $200 million by mid-year and over 180 projects have been identified as being suited to local industry. The aim, he says, is to tailor the work available to the strategic desires and capabilities of Australian industry. Over the 20 year production life of the JSF, the Australian share of work is currently projected to be somewhere between $11.5 and $12 billion, with further opportunities to follow. This is work that has been directly awarded by the major contractors, Lockheed Martin, Northrop Grumman and BAE Systems, and does not include work identified by the manufacturers of the two competing engines, Pratt & Whitney (F135) and Rolls-Royce (F136) or subcontracted from other component manufacturers.
Indeed, this subcontract work significantly enhances the value of the programme to local industry and both engine manufacturers have already awarded contracts to Australian companies. The manufacturer of harnesses and equipment for Martin Baker, the Original Equipment Manufacturer of the ejection seat, is an example of subcontract work flowing down to Australian manufacturers.
Assuming that JSF production proceeds as planned, thought is now turning to the sustainment phase of the programme and ten elements have been identified as having potential for Australian industry involvement, including warehousing of spare parts, the setting up of a Maintenance and Repair facility and the development and operation of training systems including a regional training centre. Price says that a Lockheed Martin team visited Canberra in March to discuss F-35 sustainment details with the NACC Project Office as part of the development study. Due to the current low rate of test flying, quantifying the level of sustainment that will be required, in terms of such things as spare parts usage, training hours required to convert squadron pilots etc is difficult. Price says that a clearer picture will emerge as test flying ramps up and jets begin rolling off the assembly line for the US Air Force and Marines, the first two customers to receive ‘line’ aircraft.
The Marines will be the first to achieve Initial Operating Capability and this is not due until at least 2012, so there are a lot of unknowns at the present time.
Australia joined the JSF programme as a tier three partner in June 2002 (all international partners are tier three participants except the United Kingdom, which is a tier two member), and was awarded its first manufacturing contract a year later, in June 2003. The stated requirement has always been for 100 aircraft, to replace both the F-111 and F/A-18A Hornet, and the first tranche of 14 aircraft was ordered late last year.
US law requires a military aircraft weapons system to be fully functional and capable of fulfilling its intended role before it is cleared for full-rate production, whereby multi-year contracts can be awarded. Until then, aircraft are built in (relatively) small batches, known as Low Rate Initial Production (LRIP). The benefits of LRIP is that it ensures that the aircraft are mature enough to enter service in large numbers, but this is largely offset by the fact that no large production orders can be placed (and therefore costs reduced) until such time as it deemed effective in its intended role.
This is also a problem for suppliers, who are awarded contracts on a ‘drip-feed’ system, and required to undertake major investments in facilities, tooling and manpower without the certainty of large contracts. Lockheed Martin itself is in this position too, and has to accept some degree of risk when long-lead items that will span several LRIP batches are required.
Total production is currently planned to be in the order of 3000 units, made up of 1763 for the US Air Force, 680 for the US Navy & Marines and at least 800 split between the partner nations of Australia, the United Kingdom, Canada, Denmark, Italy, The Netherlands, Norway and Turkey.
There are presently eight LRIP batches, with a ninth under consideration. These began with two aircraft being built in LRIP 1 in 2006 and will extend to LRIP 8 (211 aircraft), currently due for completion at the end of 2016. The recently announced delays could mean that numbers in each batch may vary however. Assuming the programme achieves its goals, multi-year purchases will begin in 2016 or 2017, so it will be sometime before real economies of scale can be achieved.
The Joint Project Office is currently executing LRIP 3 and negotiating contracts for LRIP 4 and, except for long-lead machined parts, has not begun contracting for LRIP 5 through 8. What this means is that present contracts are awarded on an annual basis and depending on the potential for LRIP 9 the 3-5 year contracts possible in multi-year production is still some way off. Currently the LRIP contracts are awarded on an annual basis.
Bob Price is at pains to point out that all the work-share is calculated around the 3000 aircraft for the partners and any Foreign Military Sales will be in addition to this. Israel, Japan, Singapore and South Korea have all been identified by Lockheed Martin as potential FMS customers and though each sale will be negotiated separately, there is potential for Australian companies to win work on those aircraft as well.
Lockheed Martin admits that there are probably no new major opportunities for Australian industry, other than the work currently under negotiation, but it says there is significant growth potential in those contracts already awarded.
On the negative side there are those who point out that other countries, with similar requirements, seem to have fared much better in the work-share stakes. Turkey, for example, has a requirement for 116 aircraft and not only will it assemble the vast majority of these itself (admittedly at its own cost), but is also the second-source supplier of the centre fuselage structural sections.
In addition, the ‘drip feed’ system of contracting means companies have to continually rebid for the work. This is a good thing however says Price, “If you continue building those components and you remain affordability focussed, you meet our target prices, you are responsive to schedule and you incorporate tech-refresh roadmaps in your plan, then you will remain a best-value supplier and you will get those contracts without having to compete with other companies”. He says that most opportunities coming up are competitive opportunities, “Just because you won an LRIP contract doesn’t guarantee the next one. You will have to compete for later contracts but, being an incumbent and already coming down the learning curve, it puts you in a front-runner situation”..


Work-share criticism aside, local industry has won some significant orders over the past 12 months and, subject to the successful negotiation of contracts, this will add a great deal of value to the Australian economy.
Marand Precision Engineering of Melbourne was one of the early success stories, winning a contract to design and fabricate a common engine installation and removal trailer that will be used at every air base and aboard every aircraft carrier that flies the F-35. Since then it has won several engineering contracts and most recently announced that it would assemble the vertical tail units, as a second source to BAE Systems in the UK. Subject to the development of a final business case, Marand will manufacture structural components and conduct the final assembly of more than 700 ship-sets of vertical tails at its Moorabbin facility. If successful, the first Australian vertical tail could be shipped to the assembly line in Fort Worth in the 2013 timeframe.
Perth composites manufacturer Quickstep Holdings signed an MoU with Marand in late 2009 for the manufacture the vertical tails composite skins. The company also signed an MoU with Northrop Grumman for the supply of 19,325 composite doors and access panels for the JSF. The contract will see Quickstep manufacturing 21 different components, including lower side skins, maintenance access panels, F2 fuel tank covers, lower skins and inboard weapons bay doors. Managing Director Philippe Odouard says the contract is worth $700 million and will create a minimum of 156 high-end jobs, with the possibility of a further 620 in the support activities. Odouard says Quickstep currently has a team of five people in the US, talking with the OEM and has just signed a Manufacturing License Agreement with Northrop Grumman, paving the way for the transfer of technical data. Once this has occurred, he says he expects to sign a Long Term Agreement in the second quarter of this year. The contract for the composite vertical tail skins will follow on some six to twelve months later.
Ferra Engineering of Brisbane has also recently signed a second MoU with Marvin Engineering and Lockheed Martin, for the supply of weapon adaptor assemblies. Bob Price says that the company has demonstrated the required level of capability and commitment in its previous work and the new agreement will see Ferra producing two extra adaptors over and above the original contract for four assemblies. “Under its MoU signed in 2003, Ferra has not only met all its milestones on the initial contract, but has worked with Lockheed on advanced research and development into specialised titanium machining processes”, says Price, “The results of the machining processes have proved highly successful in reducing manufacturing costs”.
Price also singles out Chemring Australia at Lara in Victoria, who recently signed an MoU for the second source supply of advanced flares to the JSF programme. In addition, he says that Lockheed Martin has accredited Electromold Australia from Thomastown as a metalworking subcontractor to several engineering companies already on contract. These companies include Ferra, Production Parts, Lovitt Technologies Australia and Levett Engineering.


During the Singapore Airshow in February, Lockheed Martin finally admitted that deliveries of the SDD aircraft are between four and six months behind schedule. Steve O’Bryan, F-35 Business Development and Customer Engagement Vice President said that, in response, the US Government has allocated a further US$ 2.8 billion for the SDD phase and another CV (carrier variant) test article will be added to expand the flight test programme. However he claimed that IOC for all three services will be preserved, including the looming 2012 date for the Marines. O’Bryan said the delays had been caused by inadequate provisioning of logistics in the early phase of SDD production, and the fact that aircraft were reaching the flight sheds in an incomplete state.
Bob Price says that although a couple of Australian companies have not delivered some components on time, he is not aware that they have attributed to the above delays. “We’re working with those companies to find out what their problems are” he said “We’ll help them get back on track, and we’ve not terminated any Australian contracts to my knowledge”. Conversely, Price points to the performance of Marand, who received a Supplier Excellence award from Lockheed Martin at the last Avalon Airshow, for its work in delivering 123 tool sets over a five-month period – just over half of the nine month timeframe originally contracted, and in response to an urgent request from Lockheed Martin.
The recent US Quadrennial Defence Review (QDR) has also thrown some doubt on the number of F-35s that will be eventually procured for the US services, particularly the number required by the US Air Force, though Lockheed Martin is still working with the original total figure of 2443.
Late deliveries and the spectre of a reduced production run will undoubtedly have its affect on industry contracting, but the cost overruns attributed to the JSF programme has resulted in the Pentagon reporting a breach of the Nunn-McCurdy laws to Congress. The Nunn-McCurdy law requires a report when a programme exceeds its cost predictions by 15%, and can result in its termination.
All of these pressures have the potential to reduce or delay F-35 manufacture and the crystal ball is somewhat cloudy when it comes to predicting the future.


According to the Director of the Australian JSF Industry Team, John Wilshire, the next major domains of industry will be in sustainment and follow-on development: “We need to get involved in technologies that are still a far way out early in the piece” he explained, “We need to learn smarter, cheaper, better production methods”.
Bob Price says that Australia has a strategic desire to bring high-technology composite manufacturing capability in to the country, and also flags Direct Manufacturing as an emerging technology being embraced here. Direct Manufacturing is where titanium parts are built up in layers by computer-controlled laser from powder or wire, thereby eliminating the waste of milling a component from a solid billet. Price says that discussions with “one or two” Australian companies are underway, with Marand being the front-runner at the present time.
Once the aircraft begin entering squadron service around the world, there will be opportunities in the Supply Chain and Global Sustainment programmes. Three examples of this could be the establishment of a regional Integrated Training Centre in Australia, a regional distribution centre to warehouse parts and equipment, or a Maintenance and Repair Organisation. All of these initiatives are intended to support the global F-35 fleet and not just the aircraft flown by the RAAF, and this could conceivably see US or regional aircraft maintained in Australia, or pilots and ground crews from around the region conducting their training here. Naturally Australian industry will have to compete for these on a global basis, however as the only JSF partner nation in the region it would seem geographically well placed.
With Japan, Singapore and South Korea identified as potential FMS customers in our region (and Israel further afield), all with well-established aerospace industries and a government-led desire to maintain a high degree of self-sufficiency, Australia may well face stiff competition in the regional sustainment areas. Price however is pragmatic, “If those countries want to use their own industry” he says, “they may have to pay a higher price”.
“We need to keep the pressure on everyone to remain affordability focussed, and the way that you do that is through competition” says Price, “We’re finding that Australian companies are continuing to win awards, because they have already incorporated the ‘Lean’ initiatives that are necessary to come down the cost curve, so they can be affordable to Australia and all of our partner nations”.
Quickstep’s Philippe Odouard sums up one of the major problems faced by all suppliers, pointing out that JSF production has to increase from around one aircraft per month today, to one aircraft per day during peak production – a thirty-fold increase! If all aircraft are built as planned, and FMS sales begin coming on board as expected, the quantities of parts supplied will increase dramatically, “It’s a nice problem to have” he says.
Despite the detractors, who point to what they see is an inadequate amount of work won for the 100 aircraft mooted for the RAAF – and the JSF programme concerns as a whole – Australian industry (and, naturally, Lockheed Martin) remain upbeat about the level of engagement.
When asked what the JSF Industry Programme means to his company, Philippe Odouard explained: “The JSF is one of the most advanced, in terms of technology, aircraft in existence. Being involved now means that you are already ahead of the rest of industry. It’s an industry that is growing very, very fast and being involved with the leaders, in terms of JSF partners, is very exciting”.
He has words of caution however, “This is a challenge for our nation, it’s really important to be involved, or you risk being left behind. In five years time, if you are not in the game, you’ll have to compete against some very serious competition”.


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