High Stakes, Big Bets

It was, recalls Tom Burbage, a high-anxiety moment. Shortly after the stock market closed on October 26, 2001, Air Force secretary James Roche stepped before a bank of microphones to announce the winner of the most lucrative competition in Pentagon history. At stake was a contract -- potentially worth $200 billion -- to build what could be the military's last manned fighter jet.

Roche's announcement would cap a five-year, winner-take-all battle between Lockheed Martin and Boeing to develop the Joint Strike Fighter (JSF), a radar-evading, sound-barrier-busting aircraft intended to serve as the go-to fighter for the U.S. Air Force, Navy, and Marines, as well as for the UK's Royal Air Force and Royal Navy. The winning team would receive a $19 billion down payment to oversee development of the next generation of combat jets. Ultimately, it could build as many as 6,000 aircraft over four decades. The loser would be left to hope that it could get a piece of the action as a subcontractor.

At Lockheed's vast fighter-jet assembly plant in Fort Worth, Texas, hundreds of employees packed into a conference center to view Roche's announcement on a big-screen television. In the crowd was Burbage, a former Navy test pilot who heads Lockheed's JSF program. This was arguably the most talked about, most closely watched fighter competition ever. After a lengthy preamble, Roche got to the point: "On the basis of strengths, weaknesses, and degree of risk of the program, it is our conclusion ... that the Lockheed Martin team is the winner." Burbage heard only the first syllable of "Lockheed." Then, pandemonium. The room erupted with wild cheering.

The victory positioned Lockheed as the dominant U.S. supplier of tactical fighters, but Burbage and his senior team were more relieved than elated. They genuinely believed that they had built the better plane. But always, in the back of their minds, was the gnawing certainty that if Lockheed lost the JSF competition, it would be forced out of the fighter business. Failure was not an option: One of Lockheed's major combat-aircraft programs, the F-16 Fighting Falcon, is slated to be replaced by the JSF. "We were competing for our future," says Burbage, a tall, trim man whose easygoing demeanor belies the Top Gun stereotype of the hard-charging fighter jock. "This was a bet-the-company effort."

To win the JSF contract, Lockheed had to do more than build the better plane. It had to overcome a perception among Pentagon brass that its management was a distant second to that of Boeing, whose stellar reputation was built on its ability to deliver such complex programs as the 777 commercial jetliner and the International Space Station. Hoping to add even more luster to Boeing's JSF team, its lead spokesman seized on an oft-quoted comment made by Darleen Druyun, the Air Force's blunt-talking acquisition chief: "This competition is not about an airplane. It's about a management team."

Lockheed has rarely been accused of being a risk-taking organization. But this time, it took big, calculated risks for a $200 billion reward. When Lockheed's future in the tactical-fighter business hung in the balance, its JSF team stepped up to the challenge: to design a top fighter for the 21st century while attempting to reclaim its management franchise and reinvent its culture. "The Lockheed guys were like the patient who undergoes heart surgery while running for his life," says Loren Thompson, a defense analyst for the Washington, DC-based Lexington Institute. "They had to fix themselves in the midst of the biggest battle they'd ever been in."

Prelude: A Company at War With Itself

The core of Lockheed's JSF team is based in a sprawling, windowless edifice located in the heart of the company's Fort Worth facility, which employs 11,000 workers. At the plant's epicenter is a milelong factory where the F-16 fighter is under production. During the next 18 months, the JSF team will grow from 500 project honchos and technical wizards to 5,000.

Lockheed acquired the Fort Worth division from General Dynamics in 1993, soon after the Department of Defense began soliciting design proposals for the JSF. The goal was affordability. The Pentagon calculated that if the Air Force, Navy, and Marines coordinated their planning and purchased the same plane together, they could slash the price tag to approximately $35 million. (The Air Force's F-22 fighter tops out at $97 million.) But to meet the military's complex requirements, contractors would have to produce a stealthy, supersonic fighter to meet the specific needs of the Air Force, Navy, and Marines. Such a multifaceted plane had been contemplated by many but realized by none.

That fact failed to deter Lockheed, Boeing, and McDonnell Douglas, each of which assembled technical teams to map out early design concepts for a prototype fighter. Almost immediately, a deep fissure threatened to split the Lockheed team. Its fault line ran from Palmdale, California, where Lockheed's legendary Skunk Works team is based, through Fort Worth.