GE, Rolls extends fixed-price offer to more fighter engines

* Extend offer to F-35 engines bought through 2014

* Claim $1 billion cost savings over 5 yrs

WASHINGTON, April 27 (Reuters) - General Electric Co (GE.N) and Britain's Rolls-Royce Group Plc (RR.L) said on Tuesday they extended an earlier fixed-price offer for engines purchased for the Pentagon's F-35 fighter through 2014, in an effort to save their multibillion dollar alternate engine from cancellation.

The two companies teamed up to develop a second engine to power the Lockheed Martin Corp (LMT.N) F-35 fighter jet. The Pentagon has proposed plans to terminate the program to build that second engine, although Congress has rebuffed the Pentagon's attempts to kill the program in each of the past four years.

Lawmakers are bracing for another fight this year, especially since Defense Secretary Robert Gates has already threatened to recommend a presidential veto if Congress funds the GE-Rolls engine once again.

The primary engine for the new fighter is being built by Pratt & Whitney, a unit of United Technologies Corp (UTX.N), and the Pentagon argues that it would be too expensive to develop both engines.

GE and Rolls said development of its F136 engine is more than 70 percent done and flight testing will start next year.

By extending the earlier fixed-price offer to engines purchased in 2012, 2013 and 2014, the GE-Rolls team said it hopes to a create more competition with Pratt, saving the U.S. government $1 billion over the next five years, and $20 billion over the life of the F-35 program.

Dan Korte, president of Rolls' defense division, said funding for the GE-Rolls engine was "a vote against a sole-source monopoly, which will raise prices and choke competition across the sector for generations to come."

Under the GE-Rolls offer, the companies would assume the risk of meeting or beating price targets for early production engines while creating pressure to drive costs lower.

They noted that production of the F-35 fighter could reach 5,000 to 6,000 aircraft over 30 years, creating a $100 billion monopoly for Pratt if the Pentagon succeeded in killing the alternate engine program, at a time when Congress is pushing the U.S. government to move toward more competition. (Reporting by Andrea Shalal-Esa; Editing by Derek Caney)