Pakistan Military Watch

A high-stakes test of U.S. defense contractors’ willingness to defy their customer and apply political pressure to safeguard their programs is unfolding here.

While key congressional votes late last week threatened to determine the fate of the alternate engine for the Lockheed Martin F-35 Joint Strike Fighter, the bitter battle between General Electric and Pratt & Whitney is likely to continue until Congress finalizes the Fiscal 2011 defense budget.

As industrial giants GE and United Technologies, Pratt’s parent company, expended substantial political capital to secure congressional support for their programs, the manufacturers accused each other of spreading misinformation on the performance, costs and jobs impact of the rival engines.

While companies are becoming increasingly bold in challenging the Defense Department via contract protests and no-bid threats, stakes are high in the engine battle because it might damage an F-35 program already reeling under skyrocketing cost projections.

At stake is the future of the General Electric/Rolls-Royce Fighter Engine Team’s F136 alternate powerplant. The Pentagon has again tried to cancel the engine, citing cost, but in its mark-up of the 2011 budget, the key House Armed Services Committee (HASC) added $485 million for development.

GE Aviation President/CEO David Joyce says competition is the only way to rein in “spiraling out-of-control costs,” citing a $2.5-billion increase in F135 development expenses. At the same time, GE and Rolls dispute the Pentagon’s $2.9-billion estimate of what it will take to complete development of the F136 and begin competitive procurement.

With $3 billion already spent on F136 development, the Pentagon’s assessment of the business case for competitive procurement has gone from negative to breakeven, but the department still argues the “extra engine” is an unaffordable luxury in today’s budget environment.

“We understand Defense Secretary Robert Gates has a number of difficult calls to make, but we disagree with him on this issue,” says Jim Guyette, president/CEO of Rolls-Royce North America. “The right answer is to invest the last 25% to complete development of F136.”

While acknowledging the JSF program was set up originally to have competitive engine procurement, publicly Lockheed Martin is staying agnostic on the issue. But a senior program official says the company’s leadership has been meeting with GE and Pratt in a bid to prevent a showdown that could damage the F-35 program.

The concern is that money for the second engine will ultimately come from somewhere in the program and further push down the ramp rate as Lockheed struggles to reach the production throughput required. In its budget mark-up, the HASC tied release of funds for the F-35 program to the Pentagon fully funding competitive engine procurement. Gates has warned the conditions could make the program “unexecutable.”