Competition among contractors can help prevent program cuts.
By BUCK MCKEON
MAY 16, 2011
For years, the Pentagon and Congress have demanded that the defense industry come up with innovative ways to improve the way the government purchases weapons. Our calls may finally have been answered this month, with the announcement by General Electric and Rolls Royce that they would self-fund the development of their engine for the Joint Strike Fighter.
At $1 trillion, the Joint Strike Fighter program is the largest defense acquisition program in U.S. history. It will replace aging fighter jets from the fleets of the Air Force, Navy and Marine Corps. It is the future of American air superiority and defense, so we have to get it right.
The Pentagon’s original plan, set in 1996, called for two companies to compete annually to build and maintain the engine that powers this critical jet. Forcing defense contractors to compete with each other is one of the most effective cost-control mechanisms at the government’s disposal.
The Joint Strike Fighter’s engine represents over 10% of the overall program price, or about $100 billion. To introduce an element of cost-control, the Defense Department accepted contracts from both Pratt & Whitney and a combined General Electric-Rolls Royce team.
In 2006, as the program grew increasingly expensive, the Pentagon decided to defund the GE-Rolls Royce engine. But Congress rightly recognized the risk of entrusting a $100 billion contract to a single firm, so for five years bipartisan majorities voted to keep the competitive program alive by continuing to fund the GE-Rolls Royce work.
Unfortunately that stopped in January, when the new Congress voted to end funding for the GE-Rolls Royce program, effectively granting Pratt a monopoly. This, at a time when the projected cost of the Pratt engine has risen almost 500% in the past three years. The program now faces $3.5 billion in cost overruns, and issues with engine turbines have contributed to a two-year delay in the overall Joint Strike Fighter program. In addition, all Pratt engines now require costly retrofits to their afterburners. To address all these issues, Pratt wants more taxpayer money from Congress.
All of these problems would be exacerbated if Pratt had no competitor, because monopolists become complacent and wasteful with taxpayer money. If the Pratt program is so haunted by problems now, it is disconcerting to consider what may happen over the three-decade life of the contract.
That’s why the GE-Rolls Royce decision to self-fund is so significant—and why the House Armed Services Committee last week voted overwhelmingly to support their continued development work.
The benefits of competition are demonstrated by the Air Force’s previous experience with the engine for the F-16. According to the Government Accountability Office, the Air Force saved over 20% by breaking up Pratt’s monopoly on F-16 engines in the 1980s. If applied to the Joint Strike Fighter program, those savings could translate into $20 billion over 30 years.
What’s more, once the Joint Strike Fighter is operational, our military’s various services will be flying the same fighter jet. One flaw in the engine could result in up to 90% of our fighter force being grounded. It’s crucial, then, to mitigate such risks by not relying on a single monopolist contractor.
With the GE-Rolls Royce development phase nearing completion, and their team shouldering the considerable financial load to help push it over the finish line, the taxpayer is now in a unique position to reap the rewards of long-term savings brought on by three decades worth of competition. This could revolutionize the way we buy military equipment, as GE and Rolls Royce have shown how to map out a pragmatic way to preserve competition without draining the Pentagon’s coffers.
This is the core of my approach to trimming the defense budget. By encouraging industry-led reforms, increasing our oversight of certain programs, and avoiding the pitfalls of government-sponsored monopolies, we can cut costs without cutting valuable military capabilities. It’s an approach that contrasts starkly with President Obama’s proposal to cut $400 billion from the defense budget over the next decade, seemingly without consideration of threats or military strategy.
Congress and the Defense Department have been presented with a unique opportunity by GE and Rolls Royce, and it is critical that we continue to support this positive development in defense acquisitions.
Mr. McKeon, a California Republican, is chairman of the House Armed Services Committee.