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Sep 09, 2009

Comments

Rick Kennedy

Pratt & Whitney is sinking tons of money into a national advertising campaign to kill a head-to-head competition with GE Rolls-Royce on the JSF program. Yet, at the very same time, the OSD has formed a special investigation team to dig into why the P&W F135 engine costs for JSF have escalated out of line.

For a program the size of JSF, the argument for annual competition is simply too compelling. Competition drives contractor behavior. It always has.

But we’ve been here before. During the "Great Engine War" of the 1980s, P&W invested tremendous resources in Washington to try to stop GE from competing for the F-16 engine business. P&W did not prevail, and the government saved billions of dollars through a head-to-head engine competition.

To this day – some 25 years later - GE and P&W fight like wild dogs in international F-16 competitions, which ultimately drive down acquisition and sustainment costs. On programs this size, engine competition always pays for itself.

It has been suggested that GE Rolls-Royce will likely encounter problems in developing its engine for the JSF, just as P&W continues to face after several years.

Isn’t that the very reason you want us fighting like dogs again?

Bryan Rahija

Hi Erin, glad to see someone from Pratt and Whitney here as well.

Erin Dick

Thanks for your post Rick. We welcome the opportunity to respond to this misinformation and set the record straight with facts.

Much has been made of the $1.9 billion cost increase on the F135 engine since 2002. This would definitely raise concern if it were true. The fact is that the $1.9 billion cost increase can not be assigned solely to the F135 engine. Hundreds of millions of dollars went to continued development of the Rolls Royce lift fan which supports both the F135 and F136. Hundreds of millions of dollars went into design changes that were made on the F135 as a result of the U.S. government changing their requirements while Pratt & Whitney was already well along in development. This was certainly no fault of the engine or its performance. The government requirement changed and that required the engine design to change. Additionally, a portion of the increase came from the constantly varying currency exchange rate which affected all manufacturers and suppliers equally. Pratt & Whitney experienced a challenge with the third turbine blade of the F135 which did account for a portion of the cost increase, but the redesign and subsequent proof testing resulted in a safer engine for a warfighters. We would rather find and fix these types of challenges in the design and development phase then when the engine is fielded and in production. Designing, testing and manufacturing the most powerful engine in the world is a big task, and we have experienced the occasional set back. As Secretary of Defense Robert Gates said, there's no reason to believe that the GE alternate engine would not encounter the same kinds of development challenges that other new engines have encountered along the way.

Much has also been made of comments from Marine Corps Brigadier General David Heinz who stated the cost of the F135 engine would increase from $6.7 million to $8.3 million over thirty years. Again, I agree this would be cause for significant alarm, if it were true. Let me put it in context. The cost of the F135 engine would indeed increase to $8.3 million over thirty years IF Pratt & Whitney made no effort and took no steps to reduce the cost. However, the facts are, we have already made significant progress these last months as we have worked aggressively to reach our cost target goals. In fact, our upcoming Low Rate Initial Production proposal, which we will present to the Joint Program Office later this month, reflects confidence in our cost reduction strategy and significantly lowers the risk to the government. The proposal will provide protection to the government from cost increases and safeguard against engine cost growth.

And for some historical context, let me remind you about the Pratt & Whitney F119, currently powering the F-22. We were able to achieve a 30 percent cost reduction from development to production and we are applying the same lesson learned on the F135 and are on the path to achieve similar cost savings.

We are certainly aware that GE provided the JPO an unsolicited firm fixed price proposal, and back in July, we offered to do the same. We just didn’t hold a press conference to announce it. And the JPO declined our offer saying they would prefer to stick to their current acquisition strategy, and we have respected that.

And finally, since you mentioned the new acquisition reform act, let me provide some context there as well. The new law requires competition to be cost effective, and Secretary Gates, the administration, and two of the three Congressionally mandated studies all determined this competition is not cost effective. This is what Secretary Gates said:

“First of all, we have looked at the business case a number of times in terms of an alternative engine to the F135. The general conclusion is that it would cost several billion dollars in addition; that it would, just by the nature of things, be three or four or more years behind the F135 engine.”

Bryan Rahija

Hi Rick,

Thank you for weighing in, great to have someone from GE join the discussion. We're all for competition. I don't think anyone is happy about a history of cost overruns, but to me that doesn't change the findings of the White House and IDA analysis.

Bryan Rahija
Project On Government Oversight

Rick Kennedy

You cite P&W's desire to reduce the cost of its JSF engines without citing its extraordinary past and current cost overruns -- overruns that would more than cover the costs associated with completing the development of a competing engine. GE and Rolls-Royce have presented a unique fixed-price proposal on initial JSF production engines - a move aligned with the Acquisition Reform Act. P&W will have to respond in kind, and GE and Rolls-Royce eagerly await that day. It will be yet another example of how competition drives behavior.

Bryan Rahija

Hi James,

Thank you for the comment--great to hear your perspective. Stay tuned as the Senate and House try and hash out the final appropriations bill.

Bryan

Jaime Gracia

The Heritage Foundation continuous to demonstrate a bias to increase defense spending at all costs, or simply sustain a defense budget that is unrealistic in light of the financial crisis and need for a budget based on sounds policies and priorities for defense. Their argument to continue funding the F-35 alternate engine does not make sense for many reasons as the post mentions, but also reflects the sentiments of President Obama, current and former Defense Secretaries, senior DoD leadership, and a bipartisan majority in the Senate.

The reality is no military requirement for another engine exists, and Congressionally mandated studies concluded that return of this investment would not be possible based on estimates and current cost projections. Further, the cost differential on the true investment varies in billions, with drastic reductions in the numbers of F-35 aircraft purchased as mentioned. How would this be economically efficient?

Another argument mentioned by Heritage is the need for redundancy in the event of engine-related groundings. What they fail to mention is that there have not been any documented instances of fleet-wide groundings in over 30 years. This is a false and misleading argument. Further, General Electric (GE) is arguing that investment costs need not be sunk, so continue to fund an unnecessary program. Other arguments are the industrial base must also be supported, but GE is the largest military engine manufacturer with plants on the F/A-18, Black Hawks, and Apaches. The majority of suppliers for the F-35 engines are shared by both contractors, so this is another red herring.

Defense programs need to be based on sound acquisition strategies based on realistic cost estimates and priorities. The alternate engine is unnecessary and will waste scarce resources needed for more critical warfighting capabilities.

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