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By Andrea Shalal
FARNBOROUGH, England, July 11 (Reuters) - The U.S. DefenseDepartment on Monday extended by two years a project that hascut the cost of Lockheed Martin Corp's F-35 fighterplane by more than $1 million per jet, and kicked off a similarproject to cut operating and maintenance costs.
The Pentagon's F-35 program office is working closely withindustry to drive down the cost of the jets - now running justover $100 million per jet - to around $85 million by 2019.
The F-35 program is the Pentagon's costliest arms program.The U.S. military plans to spend $379 billion to buy a total of2,457 F-35 warplanes over the next decades.
Under the Blueprint for Affordability cost-cutting programfirst announced two years ago, Lockheed and its key suppliers,Northrop Grumman Corp and Britain's BAE Systems Plc were due to invest $170 million in new technologies,materials and processes to lower production costs.
They are due to recoup their initial outlays from thegovernment once the accrued savings are verified. Specificprograms included boosting efficiency through improved tooling,automating production by introducing robotics, and evenmodifying assembly instructions.
The project funded 193 separate initiatives, of which 75were still in process. The investments are expected to save$1.15 million per aircraft in the ninth production lot, and $1.7million in the 10th. Over the life of the program, the changeswill save around $4 billion, according to the F-35 program.
Over the next two years, the companies have agreed to invest$24 million left over from the original program, and up to $170million more on continued work to lower the cost of the jets,the program office said.
In addition, the three companies agreed to invest up to $250million in projects aimed at cutting the cost of operating andmaintaining the jets, with a goal of saving $1 billion over afive-year period, the F-35 program office said.
Pentagon acquisition chief Frank Kendall said the extra investment by industry would help the military bridge to an F-35block purchase planned in coming years for internationalcustomers that could cut the cost of building the jets by over$2 billion.
Kendall told reporters that the department was "basicallyready to move forward" on the block buy, initially with a groupof other countries, and then later with the U.S. military.
"We'd like to see that proceed as soon as possible," hesaid. "We think we're basically ready to move forward on that."
Kendall said the separate program to cut operating costswould help the Pentagon achieve its goal of lowering the overalllifecycle cost of the program - now estimated to be over $1trillion through 2070 - by 30 percent.
Bennett Croswell, who heads the military engines business ofPratt & Whitney, a unit of United Technologies which makes theF135 engine that powers the F-35, said his company would alsoset new cost-cutting targets after completing the engine'sdevelopment programme by the end of this month.
He said the new program would involve Britain's Rolls-RoyceHoldings Plc, which makes the lift fan for the F-35Bmodel, which can land vertically like a helicopter. (Reporting by Andrea Shalal; Editing by Sandra Maler and MarkPotter)