RAF FAIRFORD, England, July 20 (Reuters) - The United

States has resumed taking delivery of F-35 jets with an interim

upgrade after a months-long halt due to software delays, and

will withhold some payments until remaining enhancements are

ready, senior officials said on Saturday.

Lockheed Martin ( LMT ) and key suppliers have been

upgrading the jets under a programme called Technology Refresh 3

- or TR-3 - that aims to improve displays and processing power.

"We are starting to accept deliveries of TR-3...It is a

truncated version...and does not have all the functionality that

we want, but it is far enough along that we can accept delivery

now," Secretary of the Air Force Frank Kendall said.

TR-3 involves both hardware and software improvements and is

seen as a pillar of a wider upgrade to the stealth jet known as

Block 4.

"The hardware of that seems to be coming along fine but the

software is lagging," Kendall told reporters at the Royal

International Air Tattoo in Britain.

"We are at a point now where we can accept aircraft with the

understanding that additional increments of software have to go

in to get it to where we need it to be."

Andrew Hunter, assistant Air Force secretary for

acquisition, technology and logistics, said the decision to

restart deliveries without the full software upgrade had been

taken in part to prevent knock-on delays to other features.

"Waiting and waiting and waiting to finalise those

capabilities that weren't quite ready is actually holding up

progress on some of the later capabilities that we also really

need," he said.

Hunter confirmed the Pentagon will continue to withhold some

final payments for each jet, but did not specify the amount.

About $7 million of the final payment for each jet, worth

roughly $100 million each, has been withheld to date.

"Not everything we contracted for has been delivered... We

will not pay for that which we have not received," Hunter said.

He added, however, that the scramble to complete TR-3 had

helped improve co-operation between companies on the world's

largest defence programme.

"We are going to work very hard to ensure that that process

of bringing down those barriers continues so that Block 4 comes

through when we need it," he said.