Monday, April 12, 2010

Three Wrongs Don’t Make a Right

Part 1 of 3: Competition

Backers of the unnecessary and unwanted alternate engine for the F-35 Joint Strike Fighter have put forth three main messages to justify the billions of dollars spent to date on the development of the F136, and the $2.9 billion necessary to actually ready this redundant, back-up engine for competition with the lead Pratt & Whitney F135 engine.. And though all three claims sound compelling and make good sound bites, they simply don’t withstand much scrutiny when measured against actual facts.

Today, we’ll address myth number one: that competition lowers cost, while also increasing reliability and contractor responsiveness.

Let’s start with the facts: every fighter, bomber, cargo, attack, surveillance, tanker, trainer aircraft and military helicopter developed during the last 30 years has been procured with a single engine supplier. The illustrious roster of aircraft includes the B-1, B-2, B-52, C-5, C-17, C130, F-117, F/A-18, F-14, F-15, F-22, A-10, T-38, U-2, E-6, KC-135, UH-60, AH-64 and Global Hawk. In each case, one supplier was entrusted to power a vital platform in the defense of freedom. We’ve delivered on those promises, and so has the competition.

Next, I would remind readers that multiple competitions have already taken place. Going head to head against the GE F120, the Pratt & Whitney F119, who shares it’s heritage with the F135, won the competition to power the F-22 in the early 1990s. Then, the F135 was chosen over the F136 as the preferred powerplant of both Joint Strike Fighter finalists, Boeing’s X-32 and Lockheed Martin’s X-35. When the latter won the final down-select, the F135 went forward as the chosen propulsion system as well.

As we’ve noted in the past, numerous government and independent studies have failed to substantiate opposition claims that competition yielded real savings on the split F-16 buy. A 1989 assessment titled “Competition in Defense Procurement” by Donald Pilling from the Studies in Defense Policy, concluded that savings can only be found if you don’t include the initial development costs of the competing engine. For that reason, splitting the F-16 engine buy never produced cost savings.

Why don’t the rules of consumerism apply? Because military aircraft engines are not commodities; their complex development cannot operate in a “bargain basement” free market when lives are at stake. The U.S. has learned this lesson several times. Following the cold war, Congress drove the price of submarines sky high by legislating competition in the submarine market. In order to avoid those costly mistakes again, the US Government generally does not compete major weapon systems programs after a winning design is selected. It’s even worse for the lead and alternate engine for the F-35 since by design, the engines are identical. Splitting that buy might drive overall costs up, as all parties strive to ensure profitability in light of lower unit sales that impact the entire supply chain.

However, one important lesson we can learn from the free market about competition is that it is usually customer-driven. Yet, none of the F-35’s primary customers want an alternative engine: not President Bush, President Obama, Secretary of Defense Gates, or the leadership of the U.S. Navy, U.S. Marine Corps, U.S. Air Force or the international partner countries.

Concerned about unnecessary costs associated with duplication in manufacturing and test facilities, training and logistics systems, and knowing this is a “buy to budget” world stressed with urgent fiscal needs to support two ongoing wars, the Joint Program Office has stated that 50 F-35 jets might have to be sacrificed to continue funding the alternative engine. Even worse, any future Component Improvement Program dollars and future performance upgrade program dollars will either be split between two engines, lessening their impact, or have to be doubled at the expense of something else in the DoD budget. To return the $2.9B of additional investment in the alternate engine, each and every F136 would have to be produced for $1-2 million less than the F135, in order for the government to even have a hope of breaking even in 30 years or so. These assumptions, as both Ash Carter and Secretary Gates have pointed out, are unrealistic.

Supporters of the backup engine also argue that competition yields non-monetary benefits such as increased safety, reliability and contractor responsiveness. These points can, once again, be entirely refuted in the F119/F-22 story. Before the dust had even settled on the “Great Engine War,” the U.S. Government awarded Pratt & Whitney the sole-source contract to power the F-22, after a head to head competition with GE. Not only is the F119 engine the safest, most reliable fighter engine ever fielded, the Performance Based Logistics contract under which the program is executed incentivizes the contractor to perform. The F119 has met its cost targets, safety and reliability targets, readiness targets, and the customer is very satisfied. This success story has been ongoing for the last 19 years. To get to the “Great Engine War,” you have to skip over these 19 years of exceptional engine safety and reliability, as well as very responsive and customer-focused program execution on behalf of Pratt & Whitney.

Gen Schwartz said it best when he said, “we’re not in the 1980s any longer, where high performance engines had suspect reliability.” His case in point was that DoD decided to develop only one engine for the F/A-18 and F-22 aircraft. Today’s jet engines are safe and reliable right out of the box. Improvements in safety and reliability come from continued investment in trouble shooting and fixing field problems. Also, contractor responsiveness can be ensured through the use of any of a number of proven, effective contracting tools to incentivize excellent contractor performance which is billions cheaper then funding a duplicative alternate engine.
On the tails of the college basketball playoffs, it should be easy to appreciate that a losing team doesn’t get an endless series of do-overs. That’s especially true when they will cost the taxpayer nearly $3 billion on top of what’s already been wasted at the expense of our warfighters with precious little to show when all is said and done.

-- EagleBlogger

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