President Obama startled the aerospace industry earlier this month when he attacked a congressionally-mandated program to build an “alternate” engine for the F-35 Joint Strike Fighter. It isn’t common for presidents to question spending programs supported by heavyweights from their own party like Ted Kennedy, especially when some of the work is likely to be done in the vital swing-state of Ohio. But Barack Obama got elected on a pledge to change the way business is done in Washington, and killing the alternate engine sends the signal that he was serious.
On its face, developing an alternative to the primary engine for the single-engine F-35 seems reasonable. America and its allies will buy over 3,000 of the planes, so why not force companies to compete for the right to supply its propulsion system? In theory, competition would discipline price and performance while providing a backup option if either engine design proves faulty. But President Obama has seen through the rhetoric, and recognized that the alternate engine is a waste of money designed to benefit the jet engine business of General Electric at the expense of warfighters, taxpayers and competitors.
GE complains that competitor Pratt & Whitney is being given a “monopoly” on F-35 engines, conveniently ignoring the fact that Pratt repeatedly beat GE in competitions to determine which company should win the role of engine supplier. It also ignores the fact that no other military aircraft developed in the last 20 years has used multiple engine suppliers, because when there is only one customer — the government — it costs more to have competing teams for the same item, not less. The government has to pay for two design teams, two production lines, two sets of spare parts and so on, minimizing the likelihood of ever saving money through competition. The high cost of sustaining two teams is the reason why the government always down-selects to only one producer of radar, landing gear and other items on planes, a fact GE doesn’t mention in its pleas for taxpayer subsidies.
The federally-funded Institute for Defense Analyses reported in 2007 that “creating competition by developing, procuring, and maintaining a second engine would require an investment of about $8.8 billion in constant fiscal year 2006 dollars,” above and beyond what it would cost to sustain a single team. Program Management Advisory Groups chartered by the government in 1998 and 2002 found only “marginal” basis for believing that maintaining two teams would lower costs on the F-35. And the Pentagon’s Cost Analysis Improvement Group found that “engine life-cycle cost estimates alone do not provide a compelling case for or against use of a competitive acquisition strategy.”
The Government Accountability Office contends there would be benefits from sustaining two teams, but undercuts its own conclusion by stating that any savings “will depend on the final approach for the competition, the number of aircraft actually purchased, and ratio of engines awarded to each contractor.” So the bottom line is that the government can save billions of dollars in the near term by killing the alternate engine, or spend the money and hope that planets align to generate some net savings over the next 30 years. There are other supposed benefits of competition such as greater reliability, but on close examination these prove to be unsupported by logic or experience. To make matters worse, congressional supporters are paying for the extra engine by cutting aircraft from the F-35 program at a key moment in its development. President Obama got it right: the alternate engine needs to be canceled for the sake of warfighters and taxpayers alike.
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