High Stakes, Big Bets

Big Risk #1: Teaming With the Enemy

A retired Marine Corps lieutenant general named Harry Blot drove Lockheed's decision to commit to the three-way teaming agreement with Northrop and BAE. Now the deputy program manager of Lockheed's JSF effort, Blot previously directed the Marines' aviation programs, which gave him an inside look at the big defense contractors' programs. After arriving at Lockheed, he made a cold-eyed assessment of the JSF team.

"As the outsider, I was convinced that Lockheed didn't have the total knowledge that it thought it had," he says. "If you've spent your entire career at Fort Worth, you only know what Fort Worth can do. I had seen the best of what Northrop and BAE had to offer. They could make Lockheed better."

Blot invited the top decision makers from Lockheed, BAE, and Northrop to an off-site in Aspen, Colorado, where he issued an appeal: We have different norms, different behaviors, maybe even different goals. So how do we work together? The question surprised executives from the two outside companies. "Lockheed wasn't known for pulling teams together," Martin Taylor, BAE's program manager on the JSF project, says dryly. "We expected the discussions to revolve around how to divide the work. But as it turned out, Lockheed was more interested in how we'd build a relationship that would add value to JSF."

Lockheed's approach to team building was to stage a kind of catfight. Blot invited Northrop and BAE to challenge Lockheed's design and then make proposals to improve it. Some of the brightest minds in aerospace engineering were gathered in that Aspen conference room. Few were shy with criticisms. "Our guys would come out of the room steaming, 'Screw them -- we're going to do this ourselves,' " recalls Blot. "I'd tell them, 'Wrong answer. Go back in. Probably all three sides will be unhappy when you come back out. But then I'll know that we've reached the right point for forming these teams.' "

Some of these catfights were captured on an electronic spreadsheet that's still displayed occasionally in the JSF control room in Fort Worth. It's more than 500 elements long. "Reopening that thing is a fairly bitter experience," says Taylor. "Each line shows the history of compromises that had to be made just to move this project forward. At any point, it would have been easier to say, 'This is too difficult. Let's go back to the old way and split the plane up.' But the management team made it clear that that was an unacceptable answer. And they were right. Neither of the three companies, individually, had the resources or the technology to make this happen. It took a collective team effort -- pushing each other beyond our wildest dreams -- to build this airplane."

Big Risk #2: There's a New Guy in Charge

A critical piece of Lockheed's strategy to win the JSF deal was to press the Pentagon for a fixed-price contract for the program's final demonstration phase. Such an agreement would cap the amount that Lockheed and Boeing could spend on the competition. "We knew that we couldn't outfinance Boeing," says a former Lockheed executive. "Our big fear was that Boeing would open its coffers and spend whatever it took to win the program." It turned out that Lockheed's fear was justified.

The defense department gave both Boeing and Lockheed $1.1 billion in funding to develop prototypes for the head-to-head fly off, and it set up a fire wall on the amount that each company could spend directly on the JSF. But in a 1999 meeting with Lockheed chairman and CEO Vance Coffman and other company executives, several senior Pentagon officials proposed torching the fire wall and initiating a cost-sharing agreement where Boeing and Lockheed would help fund the program.

For the Lockheed team, the cost-sharing proposal was a dagger. Coffman "blew his stack" and launched into a heated argument with Pentagon officials, according to people who are familiar with the situation. The blowup was another strike against the company. Later that night, a Lockheed executive met with a Pentagon official, who delivered his own broadside: "We ought to award JSF to Boeing right now."

In an attempt to repair the damage, Blackwell arranged for Air Force acquisition chief Darleen Druyun, who would have a major voice in choosing the winner of the JSF competition, to meet with a group of Lockheed sector presidents and critique the company's performance. Blackwell cataloged her views in an internal memo headlined, "The Good, the Bad, and the Ugly."

According to the memo, which was first reported in Aviation Week & Space Technology, Druyun was effusive with her praise and withering with her criticisms. Druyun's overall assessment of Lockheed's performance on the JSF project was unsparing, although it was clearly intended as a challenge to management. "Sometimes I just want to smack you on the head ... " the memo quoted Druyun as saying. "Both [Boeing and Lockheed] have good designs. We ask, 'Which team will deliver the product?' "