New fixed-price deal pitch for 2nd JSF engine
By John Reed – Air Force Times
Posted : Tuesday Apr 27, 2010 9:40:35 EDT
General Electric and Rolls-Royce have once again pitched the Pentagon on a fixed price contract for roughly 150 of their F136 engines, a move designed to save the Pentagon $1 billion in the next five years.
The proposal, GE officials said, is meant to counter the Defense Department’s justification for again cutting funding for the F136, the alternate engine for the F-35 Joint Strike Fighter.
The Pentagon “talks about it being a difficult description” to cut F136 funding largely based on the assumption that the DoD won’t save any money by pursuing an alternative to Pratt & Whitney’s F135 engine, Russ Sparks, vice president of military strategy for GE’s aviation division, said during an interview Monday.
GE and Rolls-Royce approached the F-35 program office with the offer last week and are awaiting a response, Sparks said.
Recent estimates by the DoD’s office of Cost Assessment and Program Evaluation “could only make [the price of buying two engines versus one] break even with the assumptions that they have,” Sparks said.
“If we can change that calculation by a billion dollars, then it goes from break even to a billion dollars” in savings, he said.
CAPE estimates that about $2.9 billion in development work remains to be done on the F136.
GE and Rolls-Royce are banking on the hopes that the Pentagon’s choice to exclude their engine from the program is a short-term budget choice.
By moving the program from break even to outright savings, the team hopes to motivate the Pentagon to go ahead with a competition between the F135 and F136 for the engines on the sixth-batch Low Rate Initial Production F-35s that should be delivered in 2014.
The engines would be purchased in 2012 and delivered starting in 2013, according to Sparks, who said that this is a five-year jump start over when the F-35 engine program is slated to move to the fixed price contracting phase.
Government Accountability Office estimates have predicted that competition between the two F-35 engine makers could lead to long term savings of up to 20 percent for the $100 billion engine program.
GE and Rolls-Royce say about $500 million of the proposed savings in a fixed-price deal would come from the companies beating Pentagon cost estimates. Another $500 million in savings would come from the increased pressure on Pratt & Whitney to perform if the Pentagon decides to go ahead with the fixed price competition for the 150 engines, Sparks said.
A fixed-price competition would pressure the competing engine-makers to perform better and reduce the financial risk to the Pentagon, Sparks said.
The companies made a similar overture to the Pentagon in September. That plan went nowhere after the Pentagon again refused to request additional funds to buy the engine in its 2011 budget request.
Pentagon officials insist that the second engine program is a luxury they can’t afford during a period of tight budgeting. Air Force Secretary Michael Donley has even described the alternate engine as “another rock on top of” the beleaguered F-35 program.
“It’s a close-enough call that we cannot see the benefits of considerable remaining investment in the second engine,” such as a new logistics tail and remaining development work, Donley said during a Feb. 23 House Armed Services Committee hearing.
Lawmakers are keen to fund the second engine, with Congress inserting F136 development funding into the Pentagon’s budget for the last several years. They argue that the competition will result in better engines and better prices for the engines.
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