The Pentagon and Lockheed Martin Corp remain upbeat about the future of the short takeoff version of the new F-35 Joint Strike Fighter despite Defense Secretary Robert Gates' threat to terminate the program should technical issues not be resolved in two years.

We're success-oriented; we want it to work out, Pentagon acquisition chief Ashton Carter told Reuters in an interview last week. It's important to us because it doubles the number of ships we can take JSF off from.

The Marine Corps variant, also known as the F-35B, is designed to take off from shorter runways and land vertically, like a helicopter. A variety of issues related to its unique capabilities had slowed development on the new jet.

But Lockheed executives and Carter say those issues are being addressed and the jet is outpacing its flight test schedule for the year.

Carter; Vice Admiral David Venlet, who heads the Pentagon's F-35 program office; Air Force acquisition chief David Van Buren; and Tom Burbage, Lockheed's general manager for F-35 program integration, are due to testify before the Senate Armed Services Committee on Thursday about the projected $382 billion F-35 program -- the Pentagon's costliest arms purchase.

One key issue will be negotiations under way between Lockheed and the Pentagon about a fifth batch of 35 F-35 early-production planes. The talks got off to a rocky start when Lockheed's proposal added $5 million to $7 million to the price for each plane compared with the previous batch.

Lockheed argues that its proposal is actually below the level estimated by the government last December, and notes that its costs will be higher since average monthly production under the contract would fall to three planes a month from the initially planned level of four planes a month.

Lawmakers also remain concerned about the fate of the short takeoff, vertical landing(STOVL) variant and the longer-term cost of operating and maintaining the new fighter jet, which is to replace about a dozen warplanes now in use by the U.S. armed services and foreign militaries.

Carter said Gates had wanted to give the program just one year to resolve remaining problems or face cancellation -- but he argued for an additional year to collect the needed data on the jet's weight and cost.

Carter said further issues could still emerge during flight testing, which would require engineering fixes, but Lockheed; engine maker Pratt & Whitney, a unit of United Technologies Corp ; and the Pentagon's F-35 program office are working real hard to ensure the program's success.

After the end of the two-year probation period, Pentagon officials would review the key question: Is the resulting airplane affordable and is it light enough that it can accomplish the vertical landings and the short takeoffs which are its raison d'etre? Carter said.

Lockheed is busy producing the F-35B models that have already been ordered at its plant in Fort Worth, Texas, but the probation decision limits procurement of that model to just six planes in both fiscal 2012 and fiscal 2013 -- well below the production level of 17 planes in 2010.

The plane is gearing up for sea trials on the USS Wasp, an amphibious assault ship, off the coast of Virginia this October, Lockheed officials told Reuters last week.

Those tests -- and new measurement of the weight of the B-model without heavy test equipment on board -- will be significant milestones in coming months, Burbage said.

(Reporting by Andrea Shalal-Esa, editing by Gerald E. McCormick, Gary Hill)