The U.S. Department of Defense (DOD) lowered its projected cost of procuring the F-35 Joint Strike Fighter by $7.5 billion or about 2 percent, to $391.1 billion, citing reduced labor costs and revised inflation estimates. In one of a series of selective acquisition reports (SAR) it released on March 19, the Pentagon pegged the total cost of the F-35 program, including operating and support (O&S) costs through 2065, at $1.4 trillion.

SARs are prepared annually and provide the latest cost, schedule and performance estimates for major defense acquisition programs. The Pentagon submitted the latest reports to Congress for the December 2014 reporting period, reflecting program changes from the previous December.

The F-35 aircraft subprogram cost decreased by $5.8 billion “due primarily to the incorporation of the latest prime contractor and subcontractor labor rates for all variants of the F-35 and revised escalation indices” among other reductions. These were partially offset by increased airframe estimates based on actual costs from early low-rate initial production (LRIP) lots, the Pentagon said. F135 engine subprogram costs decreased by $1.6 billion “due primarily to revised escalation indices, reductions in initial spares requirements due to maturation of the technical baseline” and revised LRIP estimates based on actual costs.

The LRIP Lot 8 negotiated costs of each of the three F-35 variants with engines and contractors’ fees remain well below yearly SAR unit recurring flyaway cost estimates, according to a summary provided by the F-35 Joint Program Office (JPO). The current average price of an F-35A conventional takeoff and landing variant with engine is $108 million, which is $4 million lower than Lot 7 prices, it said.

“F-35 unit recurring flyaway costs have been going down with each successive lot of aircraft,” the JPO said in a statement. “Lockheed Martin and Pratt & Whitney have track records for delivering the airframe and engine below government SAR estimates and we expect this trend to continue in the future.”

The estimated total F-35 program cost for 2,443 jets is also lower than indicated. According to the JPO, the Pentagon’s Office of Cost Assessment and Program Evaluation, which prepares the SARs, does not update O&S costs until a major program milestone is reached; therefore, its estimate of $1.02 trillion remains the same as in 2013. However, the JPO has revised down its estimate of O&S costs to $859 billion.