NEW YORK– Pentagon officials are working to halt spiraling costs in the F-35 Lightning II joint strike fighter aircraft program, while ensuring competition for a new refueling tanker remains fair to all contenders, Deputy Defense Secretary William J. Lynn III said here yesterday.

Lynn told the Aerospace and Defense Conference he’s concerned about both “cost and schedule challenges” associated with the next-generation fighter aircraft that Defense Secretary Robert M. Gates calls “the heart of the future of our tactical combat aviation.”

“We don’t like some of the trends we see, and we are determined not to accept those trends,” Lynn told the audience of aerospace executives.

Defense Department officials are reviewing the program and exploring ways to get the contractor, Lockheed Martin Corp., to share in the cost of scheduling delays, he said. Meanwhile, they’re revising and restructuring the program to make sure it delivers on schedule.

The big question, Lynn told the group, is: “Can we make the test program more robust and more redundant so to ensure the development comes in a timely way?”

Asked about the contentious aerial tanker competition, Lynn said Pentagon officials are striving “to play it right down the middle” to ensure it doesn’t favor either Northrop Grumman Corp. or Boeing Co.

“We want a fair competition; we want a balanced competition,” Lynn said. “We think that is what will give the best value to the taxpayer.”

The issue involves a contract for 179 aerial refuelers estimated at about $35 billion. The new tankers will replace the aging KC-135R Stratotanker fleet.

Gates told the Senate Armed Services Committee yesterday he wants both contractors vying to build the tanker to remain in the competition. “We believe that both of the principal competitors are highly qualified, and we would like to see competition continue in the process,” Gates said.

Northrop-Grumman has threatened to withdraw from the competition if the bidding terms aren’t changed, complaining that they favor Boeing. Boeing, on the other hand, contested the initial contract award to a Northrop Grumman/EADS/Airbus consortium in February 2008. The Government Accountability Office reviewed the protest and recommended that the Air Force rebid the contract due to irregularities in the contracting process.

Lynn said yesterday he’s not surprised that both contenders, in comments about the new draft request for proposal, “argued for changes that would stress some of the benefits of their individual aircraft.”

“We are going to have to play this down the middle, take fair account of any comments that are made by both sides, and move through this,” he said. “We very much want to have competition, … and we can’t favor one side over the other.”

Lynn said he expects the department to issue a final request for proposals in January.

The Air Force will be the source selection authority for the new tanker, Gates announced during the Air Force Association’s Air and Space Conference in September. Defense Department officials are working closely with the Air Force to design the strategy leading up to the selection, Lynn told reporters during a late November Pentagon news conference.

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