As the f35 Program Milestone authority, alongside Lieutenant General eric fick, the f35 Program Executive officer, were here to announce that the u. S. Department of defense and Lockheed Martin have made tremendous progress and now have an Agreement Regarding the lot 12 through 14 production contract. This is a new, stark milestone for the f35 enterprise, as the f35 is our largest tacair investment and will form the backbone of the u. S. And allied fifthgeneration inventory for the foreseeable future. A s and the joint Program Office are laserfocused on driving cost out, quality up, and achieving timely deliveries of our capability to our warfighters. With respect to ontime delivery, we have exceeded the total aircraft quantity wepe delivered to the warfighter last year, and we have a 96 ontime delivery rate, a tremendous improvement from where we were last year, with an average ontime delivery rate of 64 . On quality, while we have made progress, there are still significant opportunities for improvement, and we continue to communicate specific concerns to lockheed based on the data we collect. The 34 billion agreement for f35 lowrate initial production lots 12 through 14 includes the delivery of 478 f35 aircraft, 149 for lot 12, 160 for lot 13 and 169 for lot 14, in support of our u. S. Military services, our partner nations and our Foreign Military sales customers. This agreement represents our continued commitment to reduce f35 cost aggressively,le incentivize industry to meet required performance, and deliver advanced capabilities to our warfighters at the best value to taxpayers. There are several notable achievements that this contract represents. First, this is the first time the f35 joint Program Office will award a significant f35 aircraft procurement in the same fiscal year as the congressional appropriation year. Second, we will reach a unit recurring flyaway, urf, cost per aircraft target of 80 million for a u. S. Air force f35a price by lot 13, which is one lot earlier than planned; a significant milestone for the department. The f35 enterprise will continue to save in the lot 12 through 14 contract award. For example, in lot 14, the f35a unit cost represents an estimated overall 12. 8 reduction from lrip 11 costs for the conventional landing variant; the f35b unit cost represents an overall 12. 3 reduction from lot 11 costs for the short takeoff and landing variant; the f35c unit cost represents an overall 13. 2 reduction from lot 11 costs for the carrier variant in lot 11;io with an average of 12. 7 savings across all three variants from lot 11 to 14. These represent some of the largest achieved savings, lot over lot, for the program. This contract will allow u. S. Men and women in uniform, alongside our f35 partners, to maintain a competitive advantage, with its unique, unmatched fifthgeneration capabilities. Understandably, there will be questions today on the Program Deviation i told you about earlier this month that is due to delays in integrating the f35 into the joint simulation environment test infrastructure. Lieutenant general fick will provide more detail on that shortly. I want to reiterate that i have full faith and confidence in the f35 program and our ability to deliver f35 combat capability anywhere in the world. Make no mistake the f35 is the worlds most advanced, lethal and interoperable aircraft ever developed. I want to thank congress for their continued support of this vital program. I regularly meet with members and professional staff to provide updates and answer questions, so their leadership is greatly appreciated. As the f35 fleet continues to grow, were also growing our sustainment capabilities to ensure these aircraft are ready and capable. Due to the efforts across the f35 enterprise, led by Lieutenant General fick, dod combatcoded operational unit Mission Capability performance increased from 55 in october 2018 to 73 in september 2019. While we are making progress, we are not where we need to be. We have industrys commitment on accelerating improvements in sustainment. Our focus is on improved f35 fleet readiness and driving. Towards the Service Affordability goals. To that end, we are placing particular focus on accelerating our depot repair capability, accelerating fleet modifications, and improving autonomic logistics information system, better known as alis, functionality and responsiveness. As of last month, over 440 aircraft have been delivered at 17 bases worldwide, with over 850 pilots and 8,200 maintainers. On turkey and the f35, there has been no change to return82 turkey to the f35 program. F the s400 air defense system, which is incompatible with the f35, remains in turkey. As i said previously, turkey makes nearly one thousand parts for the f35, and will continue to do so until turkeys f35 supply chain responsibilities transfer at the end of march 2020. Lockheed martin and Pratt Whitney are responsible for that supply chain, so ill defer any questions to them. At in closing, i want to reiterate how regrettable it is that we are again under a continuing resolution. C. R. S cause great damage to our military readiness and disrupt our ability to modernize our strategic forces, including nuclear, for the future. I strongly urge congress to pass a defense appropriations and authorization bill now so that we can forward we can move forward with the many important programs needed to ensure our readiness and deter our adversaries. We at dod are grateful for our Congress Passing a twoyear budget agreement that provides the budgetary certainty the Department Needs to implement the National Defense strategy. With that, ill let Lieutenant General fick make his statement, and then ill be happy to answer questions. Thank you, ms. Lord. And thank you, ladies and gentlemen, for your interest in the f35 program. The agreement we announced yesterday is a significant one for the program in a number of ways, not the least of which are its size and overall value, 478 aircraft and 34 billion. This total includes aircraft for all three u. S. Services, our international partners, our Foreign Military sales customers, totaling 351 f35as, 86 f35bs and 41 f35cs. I am proud to be here today to represent the f35 enterprise and to share with you some of my thoughts on the state of the program. Our initial Development Efforts are coming to a close as initial Operational Test and evaluation proceeds; but as you are all aware, and as ms. Lord just mentioned, we have delayed our milestone c and fullrate production decision until such time as the joint simulation environment is available to support the director of Operational Test and evaluations assessment of the program. We look forward to his thorough assessment and are working hard with the Naval Air Systems Command and Lockheed Martin to fully integrate the f35 into this complex synthetic environment. This integration is not only critical to the completion of iot e, but it will become increasingly important to future modernization efforts on the f35. To that end, while the program has reached initial Operational Capability for all three u. S. Services, the united kingdom, italy, japan and israel, and is about to do so again in norway, we understand the need to continue its modernization to ensure it stays relevant over time. Our mandate to deliver the next increment of capabilities to the program, known as block four, on a very tight timeline drove us to look at modernizing the air system in a new way. A way strongly influenced by agile developmental methodologies standard in industry today. The Continuous Capability Development and delivery model was born of this need, and to date, we have fielded four Software Releases using this methodology. These releases have focused primarily on the correction of minor deficiencies, but have also resulted in the delivery of new capabilities, most notably the lifesaving capability inherent in the automatic ground Collision Avoidance system. Through close work with the Operational Requirements and test communities, the c2d2 process will mature and continue to deliver increments of capability over time to ensure our warfighting customers stay ahead of the threat well into the future. Ms. Lord captured well the status of yesterdays production award, including the significant savings weve realized for our warfighters and taxpayers. My joint Program Office and greg ulmers Lockheed Martin negotiating teams worked tirelessly on this deal, and im very proud of the work theyve done under excruciating pressure. With this award, we see from a production perspective the most dramatic rate increases in the production line are now behind us. Lot 12, as 149 aircraft, represent only a 6 percent increase over lot 11s quantity of 141, and the deltas for lot 14 and lot 13 are similar. You will recall that the lot 11 quantity was a full 50 percent higher than lot 10, which was itself 65 percent greater than lot nine. This dramatic production rate increase has proven to be challenging for the supply chain, but the comparatively minor quantity changes across lots 12 through 14 should give it some breathing room as we move forward. This stabilization will help with the Timely Delivery of parts to the production line and spares and repairs to the field. Speaking of the field, our hybrid Product SupportIntegrator Team has reached full Operational Capability and is currently sustaining a fleet of more than 440 aircraft in eight nations around the world, including the u. S. , norway, israel, italy, the u. K. , australia, korea and japan, and operating around the world both ashore and afloat. The netherlands will join this elite group soon with their first aircraft arrival ceremony happening here later this week. From a sustainment performance perspective, ill note that while we fell short of the secretary of defenses 80 Mission Capability mandate, we have definitely moved and continue to move the needle, increasing, as ms. Lord mentioned, the Mission Capability rate from ourit operational fleet from 55 in october of 2018 to 73 in september of 2019. Within that same timeframe, some deployed units saw sustained mc and fmc, thats Mission Capable and full Mission Capable, levels well above 80 , and even into the 90s. Are we finished . No. Are we making progress . Absolutely. Much, but not all of thatno progress is due to the actions implemented as a result of the publication and the execution of a new lifecycle sustainment plan in early 2019. Unlike many other plans like it that tend to be forgotten as soon as theyre signed, this one is actually executable, driving deliberate and nearterm actions across 10 different lines of effort, including accelerating fleet modifications; accelerating Maintenance Plan changes to the field; accelerating supplychain capability and organic depot repair capacity; and enhancing our reliability and maintainability improvement plan. All of those actions are ongoing today. On top of these actions, i need to acknowledge also that much of this progress is also attributable to the significant work of our airmen, marines and sailors operating and sustaining this impressive air system in the field today. They are doing what airmen, marines and sailors do they make things work, and for that, we are extremely grateful. We will continue to work closely with them to realize the full warfighting potential of the f35. We are at a strategic Inflection Point now on the program, moving from initial development and fielding to modernization, highrate production and global fleet sustainment as we partner with Lockheed Martin and Pratt Whitney to deliver cost effective, warwinning capabilities. Were changing our contractual relationships with these industry partners, as well. Our contracts today are transitioning away from ones that feature purely costfocused incentives, and now feature incentive structures that, for our development contracts, motivate that transition to agile and able processes i mentioned previously. Our production contracts, including this lot 12 through 14 contract, feature supplier Incentive Fees and performance Incentive Fees that drive Cost Reduction at the supplier level and improve production line velocity, and our sustainment contracts incentivize Mission Capability rates and supplier metrics that ensure our warfighters have the system they need when they need it. We continue to look for ways to improve these business relationships, including potential multipleyear and multiyear contracts for production and performancebased logistics, or pbl, contracts for sustainment. In fact, we are working today with Lockheed Martin to define the parameters of a sustainment pbl that meet our warfighters operational demands, our taxpayers bestvalue demands and our enterprises demands for greater organic involvement in f35 sustainment. In closing, let me reiterateh that im proud to be with ms. Lord here today to represent the men and the women of the f35 enterprise. Im excited to be your Program Executive officer, and im looking forward to your questions. Thank you. Were going to start here with tony. Ms. Lord, for both of you, a couple weeks ago you acknowledged that there was going to be delay of fullrate production decision. So someone not involved in the f35 program is going to ask, why is the pentagon putting out contract for 478 more planes when theyre delaying what they call fullrate production, while the combat testing intended to improve whether its effective and suitable, hasnt been finished yet, and wont for, you know, for maybe a year . So a laymans question. And then for general fick, just some figures here. Yesterday it was a 7 billion contract mod. Was that the First Tranche of the 34 billion, or was that more like last november, when you put 6 billion on in long lead . And then joints at the simulation environment, whats the earliest you think itll be up and running . So first of all, the department has the full confidence in the planes that are flying today. The air force and the marinee corps have both deployed squadrons and are very, very happy with the capability. The criteria in terms of getting out of iot e is to test against threats that we will see 10 years from now in the densities we would see 10 years from now. We can only do that in a synthetic environment. So weve completed over 90 of the testing. We are very confident in the configuration of the aircraft and we are just working on the nuances of working against these advanced threats. So the public should be extremely comfortable with the aircraft that is out there today. The full rate production decision basically codifies the final capability of the aircraf when we get through the testing versus advanced threats. So relative to your question on the 7 billion, so this is part of a series of contract awards and obligations that have been made over the course of a number of years in the execution of this effort. So if we look back to what was previously announced, we previously announced 255 aircraft along with about 11 billion obligation for advanced procurement, economic order quantities, and worked on previously. And then on the undefinitized contract action, or uca, associated with the ongoing work for the u. S. And partners in lots 12 and 13. The announcement yesterday added 114 aircraft to that total, and added an obligation of about 7 billion for work to begin on those aircraft. In addition to that obligation, we also obligated an additional 10 billion or so to lockheed that was not included in the announcement because the announcement was already made, previously made for the initiation of those deals. So that second 10 billion really is for the completion off the initial work done on those 255 first aircraft. We are can you total it up . We are right. We are still left, then, with roughly 100 aircraft to go and about another 7 billion to go, associated with the work to be done for u. S. Services in accordance with the p. B. 20. So we dont have that budget yet, we cant make that contract award for the final aircraft until such time as we have the Statutory Authority to do that. 27 billion, roughly, of the 34 had been obligated piecemeal over the last couple of years . You got it. And 7 billion to go . You got it. Okay. The jse . So relative to the jse, so the jse is a synthetic, for those of you who arent familiar with the program, the jse is a synthetic environment that allows us to fully assess the capabilities of the f35 against a wide range of air and surface threats in operationally representative threat densities. That the director of Operational Testing and evaluation, in his role in assessing the program, looks at the current threat as well as the threat 10 years into the future. And getting into an environment like the jse is critical to ourr ability to assess the system against that future threat. The integration of the f35 into the jse, as was mentioned previously, is taking longer than anticipated. The validation and verification, early validation and verification rounds for the jse will begin this fall, i believe midnovember. Im expecting those to begin. And then theyll continue throughout the spring. We believe theyll be ready for test in the marchapril timeframe, should conclude by june or july. Hi, thanks for doing this. Could you please explain for the layperson why a brandnew aircraft isnt 80 missioncapable, right or above that . Since all the parts are new. Just because when weve had this conversation before, its because of the cannibalization of parts with older aircraft. Right. So let me give that a shot, and then ill hand it over to eric. Traditionally, were trying to get capability fielded and then we are building the sustainment tail behind that. Right now, as eric mentioned, we have ramped up significantly throughout the integrated supply chain. And what we have found is we did not have the capacity and the throughput for repair of repairables and spares. So we are lagging in some of those repair parts. We are particularly having issues in three areas. One is canopies, two is engine fuel hydraulic tubes. And then wing tip lenses. So those are the areas, the particular parts, that are holding us back. So we believe we are making very Good Progress and moving forward. You did really good. Ultimately, i would just, id amplify a little bit by saying, you know, as an aircraft is fielded and you, and parts fail, and parts ultimately do fail, you take them off and you replace them with another. In my prepared remarks, i talked a little bit about the rate of acceleration, the ramp thatem weve been through from production perspective that affects not just lockheed and how they process aircraft through their production line, but all of the lowertier vendors as well that are now producing the parts at dramatically increasing rates. And then they must also produce spares, even above those rates, right . And making that ramp not just from a production perspective, but from a purchase of spares perspective, has been challenging. So one of our initiatives is to push additional spares to the field, putting additional spare purchases on contract so we can get those ready for the maintainers to install them. But then also, to take action, both within the existing supply chain and to stand up organic depot capacity to repair thee parts as they come off so that theyre available to the field to reinstall them on the aircraft. Thats been a huge part of this effort to drive higher Mission Capability ratios, making sure the maintainers have the parts on the shelf when theyre ready, when theyre needed. Ive got a couple kind of finicky numbers questions. So if i heard you right, i think you said lot 12 has 149 aircraft in it, is that correct . And if so, i think the original number that was given when you guys did a handshake deal, was 157 aircraft. So whats the reason for that difference . Were those the turkey aircraft . And then, secondly, youre saying that theres an average 12. 8 reduction for lots 12 through 14 for all variants. And again, in the handshake deal, it was said that there would be a drop of around 15 from lot sorry, lot 11 to lot 14 across all variants. So is that just a nonapples to apples comparison . Can you kind of put it in context for me . Sure. I cant address the 157 numberom right off the top of my head, so im going to have to go back in time to figure out where that number came from, and well circle back to you on it. Relative to the discrepancy between the 12. 8 and the roughly 15 reduction that you may have heard, the air vehicle reduction from lot 11 through lot 14, for the a models, was 14. 4 ; for the b models, 15. 3 ; and for the c models, 14. 6 . When we add in the engine, the reductions for the fraction of the overall unit recurringth flyway cost that is attributable to the engine, reduced at a much lower rate. So the engine rates are only down on the order of 3 between lot 11 and lot 15. So when you sum those together, it brings the overall reduction in cost, at the unit recurring flyway level across the airframe and engine, down to roughly 12 to 13 . Thats the difference. This is for ms. Lord. Dr. Roper at the air force is pursuing something called digital century series, which he thinks that in five years, they could get an airplane of the next technological generation to outfit the air force. Could you explain for us how, at least for the air force and maybe for the other services, the f35 buy might be modified to accommodate digital centuryry series airplanes and how that will also be squared against the f15ex . Were staying the course with the f35. I will say that will roper and the air force team are doing3 some very innovative and interesting things in terms of developing new fighter aircraft. We look at the total capability here versus the adversary, and we find a place for the f35, the f15 and the new century series. So we continue to fight with what we have today and focus on the future and optimize what we will have for our fleet in the future. But we are taking all of this in aggregate with a Mission Engineering approach using all the assets we have. So at this point theres no revision or rethinking of the 1,763 for the air force . No. Yes, Courtney Albon with inside defense. General fick, i wondered if you could provide some more details on the technical issues that youre working through with the joint simulation environment . And then, second, you mentioned the pbl force sustainment. Lockheed has said that having some sort of pbl is crucial to achieving the 25 million cost i per flying hour by 2025. Is that your position as well . And do you now think that that goal is achievable . Weve heard some mixed things from the pentagon on that. Sure. Okay, first, relative to the jse, i wouldnt characterize that we have any specific technically challenging hurdle to overcome, but there are a lot of, just a lot of smaller hurdles to overcome. Ultimately, what were doing is were taking a digital representation of the aircraft, right, and were integrating it into a synthetic representation of the threat space, right, to include ground threats, air threats, both blue and red weapons, environmental effects, all of those things. And were integrating them together so that the systems talk to one another digitally. And thats just a very, very large task to get done. We got off to a slow start due to some disagreements with Lockheed Martin on how to proceed. D. Youll recall that, back in the early days of the program, there was no jse. There was vsim, which was a Lockheed Martin proprietary environment, in which we were going to do that work. We elected about two peos ago to pull that work out of that proprietary environment and put it into a u. S. Governmentowned facility in the jse that will allow us to then integrate other aircraft, perhaps from other manufacturers, and do that systemofsystems work later, right . So thats, kind of, the reason we went to the jse. Again, theres just simply a lot of work to be done, and as we do that integration, and as we make progress, the system rolls more of those pieces in to thee fights; the fights get more complex; and then you find more things relative to the interactions between all of those systems. Did the Program Office underestimate how much works needed to be done . I dont know that we underestimated how much work to be done, but we struggled getting out of the gates, in particular with our relationship with lockheed and actually doing that work. So the relationship is very much better now. Were working side by side with teams of embedded lockheed coders and engineers sitting side by side with the navair folks at pax river, doing that integration. And i think theyre making decent progress. En so we have a little more time, so were going to go marcus, nick, and jon. Go ahead general, both of your predecessors have talked about the strained relationship with Lockheed Martin and Pratt Whitney over the years. I was hoping you could get your thoughts on how you characterize the relationship now and where there might beow areas for improvement . So i think between myself and greg ulmer, and i guess i would characterize between mr. Guerts and michele evans, and likely between ms. Lord and marilyn hewson, that the relationship is much improved. I have daily conversations and email exchanges at my level. I know that mr. Guerts and ms. Evans talk regularly, as well as ms. Lord and marilyn well, ill let you speak to your own relationship. Ti but i have a i think, a very open and trusting relationship with my counterpart at Lockheed Martin. It is still a business and they are still driven by businessfocused goals, and we work through the balance of that every day, working to find the balance between a taxpayer and warfighterfriendly solution that meets lockheeds business objectives. We need them to stay in business to continue building these aircraft, but were not doing it at any cost. Can i ask a quick followup on the canopies . Are they just breaking . Are the canopies on the planes just cracking or breaking, or are they breaking at a higher rate than other aircraft . The issue with the canopies has to do with the loss of the coating thats applied to the outside of the canopy, and were working to mitigate that with the prime contractor, lockheed and their subs gkn and ppg. Nick schifrin, pbs newshour. Thanks for doing this. Under secretary lord, if i could go back to turkey . A couple of questions. G the s400, what is the status of that deployment . Has it been moved around, has it been turned on . And has turkey slowrolled or delayed the parts that you talked about that it is still working on through march at all . And then just lastly, youve talked about the cost increase because of turkeys removal from the program in the past. Has that cost increase stayed the same . So, first of all, we enjoy i very, very good miltomil relationships with turkey, and turkey is an excellent supplier. No delay in turkey no, turkey has been very forth coming and again, were on the path to march 2020 to transition all of those parts out. Youve said it before we, the u. S. , because we took responsibility for moving the parts out, absorbed about a 600 million bill for that. Were still working through any unit price adjustment. We think those will be relatively modest, but any adjustments that might take place due to the 900 plus parts moving. When will the delay in the producti production start to affect production . Is it inevitable that it will delay production down the line . I will issue documents before the Christmas Holidays on our path forward with an apb and so forth and we do not see this constraining production. Can i ask a question hold on a second. What role is the oh and the role of the air forces jsc. It doesnt sound like there was a lot of talk from the november from their jsc and we know how messed up the navys is. One of the functions of osd is to act as the corporate entity across all of the services. So thats the reason i have a technical staff working under kevin fahey under asda. What we do is bring the Services Together to make sure we pass along critical information. The main way i do that is i meet biweekly with all three Service Acquisition executives and in the off week i meet with them individually. So, whereas waldo might not be totally up to speed with everything going on in the navy joint simulation environment, i will tell you that members of hondos team as well as will ropers team are very involved in that. As you know, we have both navy and air force billets in the joint air force office and we do cycle people in and out and we have integration offices. So one of the reasons osd exists is to make sure we have that crosspollination, if you will. The last one right here, mike. Thanks. Can i just get an update from you guys on the new pricing and how you expect it to drive International Demand and if you can run through the list of folks that are solid in the International New interest bucket and then maybe a little bit further afield in terms of competition that you might be eyeing. So, let me just say, there is no significant change in pricing here that i think would drive any decisions with unway or the other. We have quite a few active discussions on fmf cases. We do, we have active discussions ongoing with a number of fmf customers. Weve talked to singapore among others interested in pursuing the 35. The overall list is 10 given countries. I wont rattle them off. But you can look at anybody flying a u. S. Mds and can see them off in the future. Do you have any Closing Remarks . I want to thank you all for coming today and you will see a renewed focus on sustainment over the next 12 months out of my Office Working with the jpo. We are taking a very datadriven approach toward a potential pbl with Lockheed Martin. So were working hard at understanding where the operational availability, the Mission Capability, and where the cost per flight hour are being driven and making sure we come up with a winwin situation for both the war fighter, as well as the taxpayer. Thank you. Clarification on the parts ms. Lord, are those a thousand different parts or a thousand parts types. Individual parts. Okay, thank you, ladies and gentlemen. Gentlemen. [inaudible] my only problem is i would not characterize it as all messed up. I would not what are the Lessons Learned . What are you doing differently . [inaudible conversations] on facebook, 126 Million People were exposed to russian manipulation attempts in the 2016 election, 20 Million People on instagram, 10 million tweets on twitter to 6 million followers. We know russia attack voting systems in all 50 states. We know they targeted misinformation at specific people and we know that 27 of voting age americans saw russian misinformation in the final weeks leading up to the election. Thats what we know. What we dont know is what effect, if any, any of this had on the election, on the 2018 mid terms, what effect it will have in 2020 and not only in the united states, but liberal democracies around the world. Tonight at 8 00 eastern on the communicators, on cspan2. Boeing president and ceo Dennis Muilenburg testified about the safety of the 737 max airplane apologizing to the families of the victims of the lion air, and the ethiopia accidents. He was accompanied by chief engineer john hamilton. The commit heard from current and and former chair providing safety regulations. [inaudible conversations]