Truth: An Unfortunate Casualty of the GE Ad War?

Defense industry sage Dr. Loren Thompson of the Lexington Institute recently followed up a Forbes.com article critical of the F136 extra engine with another entry on his own site, this time chastising GE for their increasingly desperate advertising tactics.

Thompson applies his keen eye to GE’s misleading portrayal in a recent print ad about a single Government Accountability Office report that purports to suggest “total savings of about 21 percent in overall life.” In fact, he states, “The 21 percent savings are unsubstantiated claims about an earlier program that GAO acknowledges it has not analyzed in depth. The actual savings GAO thinks possible from the current program are in the 10-14 percent range -- but you wouldn't know that from reading the ad because GE has cropped the picture so you can't read the full text on that page of the report.”

No other authoritative source in the government is projecting such savings from a so-called competition and with good reason. Moreover, a $62 billion GAO figure is magically rounded up to $100 billion by GE, further obfuscating the fact that the actual amount up for grabs in a dual-source scenario is much smaller. Why? Because as Loren Thompson notes, “Most of the money in the lower figure would fall outside any competition, because it consists of spare parts and support that only one company can supply.”

Saving roughly 10 percent of $20 billion would only net $2 billion and that just isn’t worth another $3 billion to finally complete the F136’s protracted development. This gamble looks even worse when you consider it would really just create a forced split buy scenario, primarily burdening the U.S. Air Force since the Navy and Marine Corps have repeatedly said they only have room on their ships for one engine, the Pratt & Whitney F135 that’s already government certified and in production.

Thompson concludes that the Pentagon “already have an engine that works fine, and that's all they need -- just like on every other plane the military services have developed for the last quarter century. But at least GE is honest about one thing: if Congress wants to keep developing its unneeded engine in the near term, it's going to cost taxpayers money that won't be available for more pressing needs.”

No wonder the White House and Pentagon have rightly opposed the F136 under both Republican and Democratic administrations. Their unwavering leadership, recently augmented by a new generation of fiscally conservative legislators, culminated in separate decisions by the House and Senate this year to defund the program. The Department of Defense directed the F136 team on March 24 to halt work, stating “The stop work order ended the expenditure of $1 million per day on an extra engine that the DoD has assessed as unneeded and wasteful.” Now, one month later, the program has been officially terminated. The truth is that powerful.

– EagleBlogger

Beware the Zombie

As veteran analyst Dr. Loren Thompson of the Lexington Institute wrote in a late February blog on Forbes.com, the F136 extra engine has never made much sense, in large measure because the defense industry simply doesn’t work the same way as the consumer-driven marketplace.

Thompson notes, “Pentagon policymakers have argued every year since 2007 that GE’s ‘alternate engine’ is a waste of money that would duplicate efforts already made to develop the Pratt & Whitney propulsion system without providing corresponding benefits.”

Yet the F136 has lived on even longer than that. Its protracted gestation dates back to losing campaigns on the part of General Electric to have its engine chosen by Joint Strike Fighter finalists Lockheed Martin and Boeing, both of whom independently chose Pratt & Whitney’s F135 design instead. The F135 has gone on to power every F-35 flight to date, been certified by the government, and made a smooth transition to production.

Thompson argues the F136 has been buffeted by the turbulence of overriding the Pentagon’s oft-expressed wishes and best interests. “As the sole customer for the two engines, the government must cover all the costs of designing a second engine, developing and testing it, equipping and manning a second production line, funding a second supplier network, and sustaining a parallel maintenance and support infrastructure across the lifetime of the program.” In short, there’s a reason why no American military aircraft developed in the last three decades has featured multiple engines, nor for that matter do you see choices in avionics, landing gear and other major on-board systems.

Moreover, the cost of sustaining the F136 and bringing it to the market could equate to $8 billion in total, according to the federally funded Institute for Defense Analyses. The chances of such a massive investment ever being repaid is primary reason why the Pentagon and White House under both Democratic and Republican control have repeated sought to terminate the F136.

And that daunting figure presumes no further F136 teething troubles. By contrast, Pratt & Whitney’s F135 is derived from the proven F119 aboard all F-22 Raptors. Thompson adds, “Since the GE engine was begun later and not based on any prior design, its team is not as far down the learning curve and thus is likely to produce a less reliable engine.”

Lastly, Thompson debunks the notion that two engine suppliers will create more jobs, because the total number of engines will not change. “As a study by the consulting firm Whitney, Bradley & Brown pointed out, that means twice the number of vendors (with smaller amounts of work), twice the tooling, and twice the oversight…If there was a net gain in jobs from splitting the work among two teams, that presumably would be due to the inefficiency of the arrangement — inefficiency that raised rather than lowered the government’s costs.”

Two hundred and thirty-three cost-conscious members of the House of Representatives, especially dozens of Republican freshmen, took a big step in the right direction recently by voting to eliminate further funds for the wasteful F136.

– EagleBlogger

Escaping From No Man's Land

As the White House and Congress turn their attention to the 2012 budget, battle lines are already being drawn. However, the war isn't just being fought from either end of Pennsylvania Avenue. On Capitol Hill, many members of the legislative branch found themselves uncomfortably caught between their party leaders and their constituents' clearly articulated desire to lower the national debt by eliminating waste in all its forms.

And as Pratt & Whitney have cleverly portrayed in our recent "Monumental Waste" ad, what could be more redundant than an extra engine for the F-35 Joint Strike Fighter when the F135 has powered every flight to date, earned all necessary government certifications, and made a smooth transition to production?

To their credit, 233 members of the House of Representatives, including many freshmen, demonstrated ideologically rock-solid fiscal fortitude by voting to kill future funding for the $3 billion extra engine, despite the unwanted attention of the General Electric/Rolls Royce lobbying machine.

USA Today's Fredreka Schouten noted in a recent article, "Total lobbying by GE and its subsidiaries soared to $39.3 million last year, a nearly 50% increase over 2009 levels. A team of 21 in-house General Electric staffers, including former Capitol Hill and Pentagon officials, lobbied on defense issues for the company during the last three months of 2010, congressional records show."

In light of the recent House vote, we commend President Obama, Defense Secretary Gates and the rest of the Pentagon senior leadership, including Joint Chiefs Chairman Adm. Mullen, who told the Armed Services Committee, "I've been doing money a long time - I can't make sense out of a second engine." Kudos are also due for our supporters on Capitol Hill and even Speaker Boehner for allowing a free vote on this important issue. All of them have shown this debate is about doing what's right, not what's politically expedient. Eliminating the extra engine once and for all would be a great way for Washington to start winning the budgetary war and the voters' respect.

-- EagleBlogger

Secretary Gates on the Extra Engine, May 2010

SEC. GATES: The Bush administration opposed this engine. The Obama administration opposes it. We have recommended for several years now against funding this engine, considering it a waste of money. And to argue that we should add another $3 billion in what we regard as waste to protect the billion and a half (dollars) that we believe already has been wasted, frankly, I don't track the logic.

Let me just say we think -- with respect to the -- to the proposal for the alternate engine, we think the proposal is based on unrealistic cost estimates. We do believe that the full-up costs for us are about $2.9 billion. This department has a long and unhappy experience with overly optimistic contractor estimates.

The proposal does provide a fixed price, but not for the engine we need. The proposed engine is based on the design they currently have on the test stand, which we are deeply concerned may not meet the performance needs of the Joint Strike Fighter. Any cost to take the design to required JSF performance levels would presumably be paid by taxpayers.

The current engine -- their current engine, the alternate engine proposal, the engine is far less mature than the JSF engine. The proposed engine is still in development, has about 200 hours of testing compared to 13,000 for the F-135. Even the immature engines in the proposal would be more expensive than the JSF engine during the critical period of the program. And finally, the GE proposal assumes receiving a guaranteed buy of over half the JSF engines for three years in order to allow them to catch up.

As I've said before, only in Washington does a proposal where everybody wins get considered a competition, where everybody is guaranteed a piece of the action at the end. Yeah, we're in favor of competition. But my idea of competition is winner takes all, and we don't have that kind of a situation here.

Q Is there a safety readiness and operational readiness concern that the alternate engine may actually boost operational readiness?

SEC. GATES: I don't think that anybody -- I haven't heard that argument by anybody.

ADM. MULLEN: I mean, I have no concern. The services have not expressed that concern. We've flown with single engines historically and done so very well.

Joint Chiefs Chairman Mike Mullen on the Extra Engine

Joint Chiefs Chairman Mike Mullen testifies before the House Armed Services Committee on February 16, 2011

ADM. MULLEN: One of the things that we do in this town is we focus on getting stuff out the door as opposed to what it costs for life cycle. And this -- and it certainly applies on aircraft carriers, but it applies actually in all three services. This is two separate lines, two separate training, two separate maintenance manuals, two separate supply sources, all those kinds of things. And they lag each other significantly. I mean, I've been doing money a long time. I cannot make sense out of this second engine. It is two to three years behind. It's not going to compete, quite frankly.

We cannot afford to buy the second engine, I mean, from my perspective. And there have been multiple airplanes that are single- engine airplanes that are single source.

So I don't accept it; 95 percent of the fleet is going to go down at once. It just doesn't happen. We're better than that. If -- you know, the first engine will be, I think, more than adequate to meet the needs that we have for that airplane. And if I thought any different, I would, you know, be encouraging this engine, the second engine. I just categorically can't see that it's going to make any difference. It's going to cost us a lot of money, not just to get it out at the door, but over the life of its -- over the life cycle.