GAO finds cost estimates for F136 engine outdated

The Pentagon killed the F-35 Joint Strike Fighter's alternate engine, but some members of Congress are determined to revive it.

Rolls-Royce in Indianapolis had worked on the alternate engine in a joint venture with General Electric since 2002, but about 130 local engineers were reassigned to other jobs after the Pentagon killed the project in April. GE has said that about 2,500 jobs in Indiana and Ohio are tied to the alternate engine, called the F136.

A new report from the Government Accountability Office could aid a revival effort. While it doesn’t make a recommendation, the report notes that the Department of Defense has not updated its cost-benefit analysis to reflect recent changes, including the contractors’ offer to pay for the remaining development work.

“This report is further evidence that DOD must do a better job of developing a business case,” said Sen. Carl Levin, a Michigan Democrat and chairman of the Armed Services Committee. A longtime proponent of competition in military contracting, he requested the GAO report.

Another F136 supporter is House Armed Services Committee Chairman Buck McKeon, a California Republican. The F136 would have been built in Evandale, Ohio, which is in House Speaker John Boehner's district. He supports the project, but a majority of House members voted in February to kill funding for it. 

Levin also requested a 2010 report that found the Defense Department didn’t apply its usual level of “fidelity and precision” in coming up with a cost projection of $2.9 billion to continue work on the alternate engine until 2017.

Former Defense Secretary Robert Gates cited the nearly $3 billion cost in hearings this past spring.

Gates has been replaced by Leon Panetta, but the Defense Department still has no interest in updating its analysis.

“The basis for DOD opposition to the alternate engine program remains unchanged: the costs to pursue a second engine are significant and immediate, while the benefits are speculative and would not be realized until many years later,” Christine Fox, director of cost assessment and program evaluation, wrote in a response to the GAO's report, which was released on Sept. 14.

“We anticipate that many difficult decisions will have to be made on major weapon systems, including the Joint Strike Fighter program at large," Fox said. "We simply cannot afford to continue the second engine development activities with the many higher military priorities and stringent budgets we face.”

GAO staff concluded, “We continue to believe that acquisition decisions should weigh both near-term and long-term costs and benefits.”

The GE/Rolls-Royce offer to pay their own way could save $700 million through the 2012 fiscal year, the GAO found. The report also noted that other recent changes, such as the fact that the Pentagon has scaled back its purchase volume, could drive up the overall cost.

In any case, Defense Department cost analysts had not done a detailed assessment of the F136 in about two years, the report said.

Rolls-Royce spokesman George McLaren said the company would not comment on the GAO report or efforts to revive the F136.

Levin said in his press release on the report that in the past two weeks Pentagon officials have expressed a willingness to meet with the contractor team about the self-funding offer.

“I am hopeful that this shows more openness within DOD leadership to considering the benefits of competition for a program that may spend more than $30 billion on fighter engines,” Levin said.