Fixed price offer will slash Joint Strike Fighter costs

General Electric
Tags: manufacturing

The GE Rolls-Royce Fighter Engine Team on April 27 announced that they’ve offered the Pentagon a fixed price contract on their F136 engines for the Joint Strike Fighter. The unique approach would shift significant cost risks away from taxpayers and back onto the engine makers — and it would accelerate engine competition and help dramatically change the procurement process for defense. The offer is designed to reflect the spirit and intent of the Weapon Systems Acquisition Reform Act of 2009, which was signed into law to mandate competition on major defense programs and to drive fixed-price contracts. The proposal is in contrast to Pratt & Whitney’s competing engine for the F135 Joint Strike Fighter, which is funded by what’s known as a “cost plus contract” in which a manufacturer is paid for its total costs of doing the work, even if overruns result.

A win for defense reform: The F-35 Joint Strike Fighter program creates the perfect opportunity for spending reform as potential production for the U.S. Air Force, Navy, Marines and international customers can reach 5,000 to 6,000 aircraft over 30 years. Without competing engines for the fighter, a $100 billion monopoly will be handed to a single supplier.

The offer could change the government’s acquisition model for procuring approximately 150 F136 engines in the early years of the fighter program, allowing the government to know immediately its costs over this period. Also, the approach is intended to drive lower pricing between the two competing engine suppliers. The offer applies to engines purchased in 2012, followed by further price reductions for engines procured in each 2013 and 2014. “We can create a competitive environment that will save the government $1 billion over the next five years, and $20 billion over the life of the JSF program,” said David Joyce, president and CEO of GE Aviation.

Flight test is next: With more than 70 percent of its development complete, the GE/Rolls-Royce F136 engine program is poised for flight-testing next year. The F-35 is designed to replace the AV-8B Harrier, A-10, F-16, F/A-18 Hornet and the United Kingdom’s Harrier GR.7 and Sea Harrier, all of which are currently powered by GE or Rolls-Royce. F136 engine development is being led at GE Aviation in Evendale, Ohio — a Cincinnati suburb — and at Rolls-Royce in Indianapolis, Indiana.

Pratt & Whitney’s F135 development is estimated to grow 50 percent beyond its original contract, from $4.8 billion to $7.3 billion, according to a recent report from the Government Accountability Office (GAO), which noted that “F135 engine development cost increases primarily resulted from higher costs for labor and materials, supplier problems, and the rework needed to correct deficiencies with an engine blade during re-design.”

With this offer, GE and Rolls-Royce assume the risk of meeting or beating price targets for early production engines while creating a competitive behavior to drive lower costs as the learning curve phase of production must be achieved earlier. Recently, the GAO anticipated a 20 percent benefit from a JSF engine competition, using the hugely successful competition on the F-16 engine as a comparison. There are also vast benefits beyond sheer cost of the $100 billion engine program related to operational readiness and contractor responsiveness.

* Read today’s announcement
* Learn more about the arguments in favor of engine competition on the JSF
* Learn details about how the JSF engine is made
* Read “GE & the Joint Strike Fighter: Let the best engine win,” on GE Reports
* Read “Gen. Hough: JSF engine competition ‘never happened’” on GE Reports
* Read “House backs Joint Strike Fighter engine competition” on GE Reports
* Read an acquisition reform timeline
* Read a fact-sheet on the case for engine competition
* Read the GAO’s May 2009 report on the JSF
* Use our online tools to tell your senator your views about the F136
* Read Lt. Gen. Hough’s full post on
* Read Desert Storm air commander Gen. Chuck Horner’s opinion piece
* Read the JSF recommendations made by the Heritage Foundation

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