Lockheed renews effort for multiyear contract on cargo aircraft

Lockheed Martin Corp. is renewing its efforts to secure a long-term contract from the Pentagon for one of its workhorse cargo aircraft -- the C-130J.

Lockheed Martin, for several years now, has wanted to clench a multiyear contract for the C-130J and has submitted unsolicited proposals to the Air Force. So far, however, no agreement has been reached.

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That could all change in a matter of months. The defense company is in negotiations with the Air Force to finalize the price for 65 C-130J. That price and the result of that negotiation are going to serve as a starting point for a multiyear contract negotiation, said Jack Crisler, Lockheed’s international vice president for air mobility business development.

“What we will have to demonstrate is a business case that shows a 10 percent savings from that,” Crisler said.

Sometime in September or October, Lockheed plans to propose a five-year contract, Crisler said. The Air Force manages its own C-130J buys but also those of the Marine Corps.

The discussions of a multiyear contract could also include planes for Special Operations Command and the Coast Guard.

If the Pentagon accepts the multiyear proposal, Lockheed could see money for the planes as early as fiscal year 2012.

David Van Buren, the Air Force’s acquisition executive, said Friday that so far those in charge of the C-130J buys have done “quite a good job” negotiating a good price for the regular C-130J contracts with Lockheed Martin. But when it came to discussions of another multiyear, Van Buren said that in “prior discussions” Lockheed “was unable to show savings from a multiyear contract, which would have made everybody enthused to go forward.”

But Van Buren indicated the Air Force is willing to carry on the discussions.

“If Lockheed had a different approach to cost structure, or had some thoughts or ways that they felt that they could give the Air Force -- from where we are right now -- a 10 percent reduction for a multiyear, or greater, then I think the Air Force would take it very seriously,” Van Buren told reporters on Friday.

One C-130J costs about $60 million. The “fly-away” cost of one C-130J varies based on quantity and configuration. According to the Air Force, the contract price for one C-130 J delivered in 2010 is $57.6 million, without government furnished equipment or spares.

The C-130J is the successor to the C-130 Hercules E-H models that form the backbone of America’s tactical airlift. Lockheed developed the newer J-version as a private venture.

The C-130J flies farther, faster, with more cargo and higher reliability than the older aircraft versions, the company contends.

The C-130J had its share of critics within the Pentagon, who almost succeeded in cutting the contract with Lockheed Martin short. But congressional pressure from Georgia and West Virginia lawmakers, where the plane is built, has kept the program going.