Pentagon Narrows F-35 Upgrades to Stabilize Schedule as Costs and Shortages Rise

A Government Accountability Office audit reported the F-35 modernization package known as Block 4 will field fewer capabilities than earlier plans, with completion targeted “at the earliest” in 2031. The audit lists a reduced set focused on electronic warfare, added weapons, communications, and navigation. Items tied to an engine upgrade and higher power and cooling move to later efforts. Program officials acknowledged the shift and linked it to a steadier delivery pace with formal documentation due in the fall.

GAO’s September report described Block 4 content as a subset of the 66 capabilities counted in 2018 and later additions. Several items were removed or deferred after a 2024 review found many features would not reach the fleet before the mid-2030s. The office wrote that as of May 2025, it had not received an approved capability list from program managers. Defense officials confirm the updated list and baseline will be published with the major subprogram paperwork later this year.

In December 2023, program cost data showed a total acquisition of $485.2 billion, up from $442.3 billion the previous year and $89.5 billion above the 2012 rebaseline. The same data put lifecycle operations and support at not less than $1.58 trillion, pushing acquisition plus sustainment over $2 trillion. GAO attributed earlier Block 4 cost growth, from $10.6 billion to $16.5 billion by 2021, to added content, test and lab investments, and schedule churn. Managers have not yet completed a new estimate for the reduced plan.

Program officials also recorded a management move. Block 4 and TR-3 now run as a designated major subprogram under current acquisition policy. The structure assigns its own cost, schedule and performance baselines and sets document gates in the fall of 2025. GAO linked this change to congressional direction in 2023 and to earlier recommendations to treat modernization as a distinct line to improve transparency and control.

GAO September 2025 findings on reduced Block 4 content and 2031 completion goal

The 2018 plan set completion of 66 Block 4 capabilities for 2026. In 2024, reporting moved that to 2029 after content grew and prerequisite hardware lagged. The September 2025 audit set “2031 at the earliest” for the trimmed set, with additional features pushed to undefined future increments. Managers told auditors the fall baseline will list the remaining items, the test plans for each, and the cut-in points on production lots.

The 2024 independent review cited technical feasibility as a main reason many capabilities could not be finished before the mid-2030s. Program offices then screened features for maturity, available funding and priorities from the services and partner nations. Items without enough power and cooling, or that no longer met validated needs, left the near-term list. Defense officials confirm the 2031 planning window excludes functions that depend on the engine core upgrade or an improved power and thermal management subsystem.

May 2025 audit status notes said the office could not provide a final capability list to GAO. Managers pointed to trades among sensors, weapons and software loads as they tried to lock down lab schedules and flight-test windows. The fall document set will define the reduced package’s cost baseline and the performance targets for operational test. The remaining features will move to post-2031 increments.

Program leadership kept earlier figures for context. The 2021 Block 4 estimate stood at $16.5 billion, over 50 percent above the original $10.6 billion figure. GAO cautioned against a direct comparison once the new estimate arrives, since the content portfolio is no longer the same. The audit team tied cost growth in prior years to content expansion and to delays that forced added lab time, software rework and additional test events.

Recent supplier and lab capacity changes this year support the narrowed 2031 target. Added test benches for the integrated core processor and for sensor suites, which had previously paced the schedule. New governance consolidates software content drops and their evidence packages under a single chain, addressing earlier fragmentation between production and modernization lines.

TR-3 status hardware and software, acceptance decisions, and withheld payments from 2024 to 2025

TR-3 provides the hardware and software base for many Block 4 features. The package adds a new integrated core processor, expanded memory, and cockpit display changes. Managers told auditors the integrated core processor design had reached maturity by July 2025. It had been a source of delays and quality defects. Added testing and tighter supplier oversight helped. Two items still drive the schedule: stability issues in TR-3 software and completion of the Next Generation Distributed Aperture System. Program estimates put the latter in 2026.

In July 2024, the department began provisionally accepting aircraft with TR-3 hardware but without combat-capable software. The move aimed to avoid storing more than one hundred high-value jets at contractor sites. The office withheld about $5 million per aircraft in this interim setup. Partial release was tied to test gates such as weapons validation and integrated core processor criteria. The plan starts in July 2025 to update accepted aircraft with a limited combat-capable load. Full capability remains in development and test.

Calendar-year 2024 production showed TR-3’s impact. The contractor delivered 110 aircraft, all late. Average lateness was 238 days, versus 61 days the prior year. By May 2025, 80 aircraft had been delivered that calendar year. Of those, 74 belonged to lots due in 2023 and 2024. Twenty aircraft from 2024 still awaited delivery at that point. Defense officials confirm the provisional acceptance decision spread inventory instead of concentrating dozens of jets at a small number of locations.

Engine deliveries tracked the same pattern. The engine contractor delivered all 123 engines late in 2024. Average lateness was 155 days compared with 68 days in 2023. The government issued corrective action requests in 2024 to address late deliveries and supplier constraints. Auditors noted some quality improvements but no recovery on timing. The department also documented an August 2024 plan from the engine contractor to increase supplier quality and capacity.

The audit linked TR-3 delays to specific software behavior under test. Stability issues affected radar and cockpit displays. The program also reported unreliable system start-ups from combined hardware and software faults. Managers expanded software maturation efforts and raised oversight on the integrated core processor line. Defense officials confirm the combat-capable TR-3 baseline targets 2026 for full fielding on new deliveries. Previously accepted interim jets receive software updates as builds clear testing.

Acquisition totals, lifecycle costs, and engine power and thermal constraints with $38 billion impact

December 2023 Selected Acquisition Report tables placed total acquisition at $485.2 billion and recorded an $89.5 billion rise over the 2012 rebaseline. The 2001 baseline stood at $233.0 billion, so the acquisition total more than doubled the earliest figure. GAO’s summary placed lifecycle operations and sustainment at not less than $1.58 trillion, pushing acquisition plus sustainment beyond $2 trillion. Those values come straight from program documentation. They reflect then-year dollars, with rounding noted in the table footers.

Engine and thermal headroom remain the constraint behind several deferred features. Program managers told auditors the current aircraft must run its engine harder than intended to satisfy today’s power and cooling needs. That reduces component life. The audit laid out an added $38 billion in lifecycle cost attributable to that extra strain. Program teams continue work on an engine core upgrade and improvements to the power and thermal management system. GAO’s timelines showed those events pacing advanced sensors and heavier electronic-warfare modes that were deferred from the near-term Block 4 list.

Cost reporting will change with the fall baseline. Treating Block 4 as its own major subprogram draws a distinct cost estimate that separates growth from content changes and from delays. The office expects to complete the new estimate later this year and to align budget submissions and partner planning against the result. Defense officials confirm the new baseline will include schedule and performance targets mapped to lab work, flight-test and production cut-ins.

Table references in the audit documented prior increases. The 2021 Block 4 estimate, at $16.5 billion, reflected expanded content and the integrated test and lab investments needed to absorb the larger software load. Managers have not yet published the reduced-content figure. The office will also formalize the acquisition pathway for the engine and thermal modernization line. GAO noted pre-development contract actions, but a selection decision was still pending in the report period.

Power and cooling capacity drive the partitioning of features. Items that require the engine core upgrade or improved thermal management move to post-2031 modernization increments. Items that no longer meet validated needs leave the plan entirely. The reduced content focuses on capabilities that labs and test ranges can qualify on current power and thermal margins once TR-3 stabilizes. Schedules for software drops and production incorporation are documented.

Production delays, documented parts shortages, and incentive fee structures from 2023 to 2025

February 2025 final assembly data showed more than 4,000 parts shortages at the last production stage, roughly double the historic average. More than 1,600 of those tied to TR-3 hardware. The line could not hold every jet awaiting late components, so the contractor stored 52 aircraft off the line until required parts arrived. The audit named a specific driver, the leading-edge flap on the wing. It continued to cause delays across 2023 and 2024. The part is produced by the prime. Defense officials confirm supplier-risk screening and logistics actions are in motion. Auditors still project parts-driven delays through 2025.

Incentive fee mechanics came under direct scrutiny. The program paid hundreds of millions of dollars in incentives across recent lots. That included fees for on-time delivery contractors could partially earn even when aircraft arrived up to 60 days late. GAO highlighted figures showing millions earned by the aircraft and engine contractors despite late deliveries in 2024 and worsening schedule performance across multiple years. Recommendations in September pressed the department to reassess fee structures and align incentives with actual on-time outcomes.

Engine incentives followed the same theme. The engine contractor accrued tens of millions in incentive fees across lots where every engine arrived late. The audit documented penalties for lateness offset by fees for lower total assembly time. The net effect was positive payouts even as on-time performance declined. The government issued higher-level corrective actions in April 2024 and tracked a follow-on supplier plan in August. Auditors still recorded average engine lateness at 155 days in 2024.

Program reporting also cataloged “major variance requests” across aircraft lots. The audit showed every lot delivered with significant variances, and many lots remained open. Key information about those variances sat in disparate locations. GAO called for better tracking of how long variances remain, the cost to resolve them, and the operating impact on delivered aircraft. Defense officials confirm a consolidation effort for variance data so managers can assess schedule impacts and supplier performance at the lot level.

As of May 2025, delivery composition underscored the backlog. Program data listed 80 aircraft delivered in 2025. Of those, 74 were drawn from lots due in 2023 and 2024. Twenty aircraft from 2024 were still outstanding at that point. Managers tied late deliveries primarily to TR-3 hardware and software slippage and to parts shortages clustered in final assembly. Training units used provisionally accepted aircraft while updates moved through flight test and operational test.

According to industry sources, suppliers added targeted machining and electronics capacity on the highest-impact parts flagged by the government’s contract management agency. The office also raised throughput on the processor line to buffer against defects as software matures. Those steps matched corrective actions and aim to protect the final assembly rhythm while TR-3 moves toward combat-capable software.

Lockheed Martin’s public statement during the audit release emphasized continued deliveries and ongoing modernization. It set a target of 170 to 190 aircraft in 2025 and a commitment to keep fielding Block 4 content within the reduced plan. The audit did not assess the marketing claims. It documented the schedule and cost trends and recommended six actions. These included evaluating capacity before setting buy quantities, restructuring incentives to avoid paying for late results, and expanding modern product-development practices such as broader use of digital models.

Our analysis finds the narrowed Block 4 package trades content for near-term predictability. It sets a completion window that the field can absorb and adds clearer controls on cost and schedule. The cost burden remains high. Power and thermal limits still bound future options. The approach moves toward a single baseline with verifiable gates for software, test, and production.

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