GE's JSF Alternate Engine Ad Mischaracterizes GAO Report

By Nick Schwellenbach

POGO has chosen not to take sides in the debate over whether or not to fund a second engine for the Joint Strike Fighter. While there are lawmakers and groups that have taken positions based on parochial reasons, we think it’s a debate in which reasonable people can disagree.

However, to paraphrase the late Senator Daniel Patrick Moynihan (formerly D-NY), while the two sides are entitled to their opinions, we don’t think they’re entitled to their own set of facts. We’ve been bothered by information coming from the pro-alternate engine side—we think they’ve been stretching the facts a bit beyond what they’ll allow.

This alt engine is still a very live issue even though it got shot down in the vote on an earlier continuing resolution in February and the Pentagon issued a stop-work order a few weeks ago. Alt-engine manufacturers General Electric and Rolls Royce are aggressively lobbying to restore funding. Their lobbying campaign relies in large part on a misleading claim.

GE has run ads that state that the Government Accountability Office (GAO) says competition between GE’s alternate engine and the Pratt and Whitney engine will yield savings of 21 percent on roughly $100 billion GE says will be spent on JSF engines. "According to the non-partisan GAO, competition in the JSF engine program will deliver 21% savings, which equates to $20 billion for taxpayers,” GE says in a full-page ad it ran in The Washington Post. This claim isn’t true.

The GAO’s Michael Sullivan, in his latest testimony on the alt engine last year, wrote that a competition could, if certain assumptions are met, generate some savings, but that GAO is only confident that 10-14 percent savings are achievable. GAO leaves open the possibility that more savings could be achieved; however, there is a big difference between 14 percent and 21 percent. This is a far cry from stating that competition “will deliver 21% savings.”

It’s rare for us, especially me, to echo the comments of the defense contractor-funded Lexington Institute. But in this case, the Lexington Institute’s Loren Thompson is on target. According to Thompson, GE’s claim is bogus because:

All of the other government agencies that have looked at the alternate engine have come to less positive conclusions, labeling purported savings as "unlikely" or "marginal." But if you read the GAO report on which General Electric based its ad in the Post, it turns out even GAO doesn't think 21 percent savings are likely. The 21 percent savings are unsubstantiated claims about an earlier program that GAO acknowledges it has not analyzed in depth. The actual savings GAO thinks possible from the current program are in the 10-14 percent range, but you wouldn't know that from reading the ad because GE has cropped the picture so you can't read the full text on that page of the report.

So no one anywhere in the government is suggesting savings on the scale that GE claims. Not only has General Electric misrepresented the findings of the GAO report, but it has compounded the falsehood by applying the imaginary rate of savings to an inflated dollar value for the program—which GAO puts at $62 billion in 2002 dollars, not the $100 billion the ad states. And most of the money in the lower figure would fall outside any competition, because it consists of spare parts and support that only one company can supply. When you look at the amount of money actually available for competitive bidding and the rate of savings GAO actually calculated, you come up with a very small fraction of the amount GE claims (and even that is purely speculative).

By the way, after adjusting for inflation, $62 billion in 2002 dollars is equivalent to approximately $75 billion in 2010 dollars.

Nick Schwellenbach is POGO's Director of Investigations.

See also:

• On the Joint Strike Fighter Alternate Engine
• Experts, Contractors, and the F-35 Alternate Engine

Comments

[Dfens]

I've never heard the GAO have anything negative to say about the "consolidation" of military contractors, nor have they ever had anything bad to say about "cost plus award fee" contracting. Both have served to eliminate any significant competiton from military contracting. The only place they seem to like competition is in proposals, which are nothing but a bundled stack of lies. So, yes, they are for competition when it comes to proving who is the best liar. Yeah, they've got your back.

[Outcast]

DFENS, what evidence do you have that the GAO has long been known to hate competition?
FORMULA, Schwellenbach cites the GAO as claiming that competition could, if certain assumptions are met, generate some savings, but that GAO is only confident that 10-14 percent savings are achievable. That's if certain assumptions are met. Who are you putting your faith in?

[Formula]

It sounds to me like POGO is against the alternate engine. You could have stated even with the 10-14% and the 75B in adjusted 2010 dollars the alternate engine can still produce a savings to the taxpayer of 7.5 to 10.5B over 20years.....and thats the "conservative" savings, it would probably be more than that. It would be nice for you to run your article again and include the positive spin even though it may be lower than GE advertised.

[Dfens]

In retrospect, it is unfortunate for the US taxpayer that the USAF did not fund both Boeing and Lockheed to develop their entire aircraft all the way to production competitively. There would have been at least some incentive for both companies to reduce costs and schedule slides. The GAO has long been known to hate competition between contractors for fear that it might reduce our perceived need for thier bloated, leaching bureacracy.