Photo: U.S. Navy, via Wikimedia Commons.

It's 70% over budget, and years behind schedule, but that hasn't stopped the Pentagon from estimating that it'll spend $392 billion for 2,443 F-35s over the next few decades. Further, according to an estimate from the Cost Analysis and Program Evaluation office, or CAPE, the price to operate and maintain the F-35s for the next 55 years is $1.1 trillion -- the Pentagon's F-35 office, however, puts the cost at $857 billion. Regardless of final price, Lockheed Martin's (LMT -0.05%) F-35 is costing America a pretty penny. Is it worth it? 

You get more flies with honey
The F-35 is over budget and years behind schedule, but it is starting to see successes. In fact, according to Reuters, Frank Kendall, undersecretary of defense for acquisition, said about the F-35, "Program progress is sufficient for the department to budget for an increase in the production rate in fiscal year 2015." 

More importantly, Kendall said the F-35's reliability is improving, as are acquisition costs. This is especially good news for Lockheed, as well as United Technologies' (RTX -0.76%) subsidiary Pratt & Whitney, which makes the engine for the F-35, because Kendall said he planned to "provide strong financial incentives to LM and P&W to complete development and drive down cost in both production and sustainment."

The Inspector General has concerns
That's great news, but according to a Quality Assurance Assessment report released by the Inspector General on Sept. 30, the F-35 has a number a major issues that could "adversely affect aircraft performance, reliability, maintainability, and ultimately program cost." More pointedly, the report found 362 findings, which contained 719 issues.

Luckily, the Joint Program Office, or JPO, which overseas the F-35 program, said it's been working with Lockheed and its subcontractors, including Northrop Grumman and BAE, to "implement corrective actions," to address the IGs concerns. However, the IG report also said the JPO disagreed with some of the IGs findings, such as performing "process proofing of all critical processes," and those issues hadn't been resolved. 

What to watch
The F-35 is making progress, and there's reason for investors to be hopeful -- especially since more and more countries are interested in purchasing the F-35. However, there are also a number of issues that still need to be addressed. Will Lockheed be able to do it? Most likely. Will it end up costing the government more money? Quite possibly. Regardless, the F-35 is a lucrative contract for Lockheed -- and its subcontractors -- and at this stage of the game, it's highly unlikely the government will pull the plug. Consequently, it'll also likely prove beneficial to Lockheed's bottom line for years to come.