* Lift fan variant blamed for significant past cost growth
* Pratt offers to assume liability for some cost growth
* Pentagon still opposes GE-Rolls alternate engine project
* Recent damage to Pratt engine being investigated
*Source: DTN News / Reuters By Andrea Shalal-Esa
(NSI News Source Info) NATIONAL HARBOR, Maryland, USA - September 16, 2009: The Pentagon is pressing United Technologies Corp (UTX.N) to cut costs on the engine it builds for Lockheed Martin Corp's (LMT.N) F-35 fighter, but said problems with that engine do not justify spending billions on an alternate F-35 engine.
The stealthy, supersonic multi-role fighter was designated the F-35 Lightning II in July 2006. The JSF is being built in three variants: a conventional take-off and landing aircraft (CTOL) for the US Air Force; a carrier variant (CV) for the US Navy; and a short take-off and vertical landing (STOVL) aircraft for the US Marine Corps and the Royal Navy. A 70%-90% commonality is required for all variants.
The requirement is for: USAF F-35A air-to-ground strike aircraft, replacing F-16 and A-10, complementing F-22 (1763); USMC F-35B – STOVL strike fighter to replace F/A-18B/C and AV-8B (480); UK RN F-35C – STOVL strike fighter to replace Sea Harriers (60); US Navy F-35C – first-day-of-war strike fighter to replace F/A-18B/C and A-6, complementing the F/A-18E/F (480 aircraft).
Pentagon spokesman Geoff Morrell said a mishap that damaged an F135 engine built by United Technologies unit Pratt & Whitney during testing last Friday raised questions about Pratt's work, not the single-engine approach.
"It's a concern with regards to how Pratt & Whitney is developing this engine and with regards to, frankly, how the program office is managing that development," he told reporters at the Pentagon on Tuesday.
"We have all got to focus harder on getting this engine to perform to the level that we know it can," he said.
Pentagon acquisition chief Ashton Carter initiated a high-level independent review of Pratt's cost structures that is due to report back early next month. The group visited Pratt's Connecticut facility last Thursday and Friday.
Air Force Major General C.D. Moore, the program's deputy executive officer, told Reuters the Pentagon was pressing Pratt for a reduction comparable to the 30 percent cut it achieved for the related F-22 fighter engine.
He said work on the short-takeoff, vertical-landing (STOVL) version of the F-35 accounted for a significant part of the $1.9 billion in cost overruns already seen on the engine.
The STOVL version includes a lift fan built by Britain's Rolls Royce Group PLC (RR.L), which has experienced significant challenges, Moore told Reuters on the sidelines of the Air Force Association annual conference.
Rolls is a supplier to United Technologies' Pratt & Whitney unit for the F135 engine, the primary engine for the F-35. It is also part of a team with General Electric Co that is developing the alternate F-35 engine that the Obama administration wants to terminate.
Lawmakers have repeatedly defied the wishes of past administrations to continue funding the project, but President Barack Obama and Defense Secretary Robert Gates have dug in their heels on what they call wasteful spending.
Congressional aides said the Pratt engine incident could spur support for the second engine. Officials expect to have answers soon, possibly by Friday. Moore said the investigation was ongoing, but initial indications were that the problem did not appear to be caused by a design defect. William Begert, head of business development for Pratt, told reporters on Tuesday that Pratt had proposed a cost-plus contract for 37 engines that trimmed the cost of the F135 engines from the last batch by at least 10 percent.
"This is a major step in the direction of getting down the cost curve to where we want to be," Begert said. Under the proposal, Pratt would also assume responsibility for part of any further cost growth on the program, he said.
He said Pratt had offered the F-35 program fixed-price terms in July, but officials opted for a cost-plus structure at this stage of the engine's development. Pratt said it remained ready to offer a firm, fixed-price bid if the program wished.
Moore said cost-plus contracts give the Pentagon more insight into a company's cost structure, and that was important at this point, given efforts to get Pratt's engine costs under control. He did not comment on the GE-Rolls bid.
GE and Rolls-Royce began discussing a fixed-price proposal with the Pentagon in April and submitted that kind of bid for their next batch of F136 engines on Sept. 1.
Officials had been cooperating with the GE-Rolls team and actually initiated daily meetings at one point to help the team structure its proposal, said Jean Lydon-Rodgers, president of the joint fighter engine team, in an interview.
She said the Pratt proposal had clearly been sparked by the debate over the second engine: "The fact that they are working to lower their costs is a big victory for competition."
Begert said Pratt had invested heavily to drive costs lower and reach a "learned out" cost by 2014 at the 250-engine mark.
Begert said Pratt continued to work very closely with Rolls-Royce, whose work on the lift fan has contributed heavily to the cost overruns, on the STOVL version. "That's the part that we continue to struggle with," Begert added.
(Reporting by Andrea Shalal-Esa; editing by Tim Dobbyn and Andre Grenon)
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