* GE-Rolls ready to spend $100 mln of their own
* Pentagon says opposition to 2nd engine has not changed (Adds quotes, Pentagon reaction, background, byline)
By Jim Wolf
WASHINGTON, May 5 (Reuters) - General Electric Co (GE.N) and Rolls Royce Group Plc (RR.L) asked the Pentagon on Thursday to let them resume development, at their own expense, of a controversial alternate engine for the multinational F-35 fighter jet.
At stake is potential business that General Electric and others put at more than $100 billion in coming decades. It is also a challenge to President Barack Obama and Defense Secretary Robert Gates, who have dismissed the interchangeable engine project as unaffordable and a waste.
The Defense Department killed the competitive engine program last month in a boost for United Technologies Corp (UTX.N), whose Pratt & Whitney subsidiary builds the engine powering early production F-35s.
The Defense Department's stance on the program "has not changed," said Cheryl Irwin, a Pentagon spokeswoman, in response to the GE-led team's renewed push to keep its engine alive.
The radar-evading F-35, built by Lockheed Martin Corp (LMT.N), is the Pentagon's costliest arms purchase at some $382 billion for what are now due to be 2,443 planes.
GE and Rolls are prepared to spend more than $100 million of their own money to fund the second engine's development through the end of fiscal 2012, GE spokesman Rick Kennedy said in an email.
"GE and Rolls Royce are simply asking that they are provided -- at no cost to the government -- access to the engines, components, and testing facilities to continue their development work," he said.
The companies have been shut off from the hardware since the Pentagon finally stopped work on the program, five years after it started seeking to do so as a belt-tightening move. Lawmakers omitted funds for the project in a long-delayed budget deal last month to cover U.S. spending for the remainder of fiscal 2011, that ends Sept. 30.
The Pentagon has said it would cost $2.9 billion more to develop the alternate engine to the point that it could vie with Pratt & Whitney for orders. The Defense Department maintains that it does not foresee a payback for the investment. Its backers say it could save billions of dollars over time.
The chairman of the House of Representatives Armed Services Committee, Howard McKeon, hailed the GE-Rolls self-funding offer as a "smart, viable solution to a tough problem," referring to the Pentagon budget squeeze.
"I will accept and support their approach," he said in remarks at the Heritage Foundation, a conservative research group that was kicking off its "Protect America Month."
Letting the companies wrap up the development work using their own funds would "break up a monopoly, potentially harvest billions in savings, while fielding a more capable, more robust fighter jet -- all at zero cost to the American taxpayer," McKeon said.
The California Republican described the proposal as a watershed that could change the way certain big arms systems are developed and funded by the Pentagon.
"I hope and would encourage the Secretary of Defense, Members of Congress and our industry partners to support this innovative approach to providing our troops with the resources they need to succeed," McKeon said.
A House Armed Services panel that oversees air and land forces voted Wednesday to force the Pentagon to reopen the engine competition if Pratt & Whitney seeks more money to boost its engine's performance for the F-35. It did so in its recommendations on a fiscal 2012 miliary spending bill.
Eight countries have joined the United States to co-develop the F-35 -- Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark and Norway.
McKeon also criticized a plan announced by Obama last month to trim $400 billion from the $10 trillion or so in projected U.S. national security spending through 2023.
Any savings that are identified by the Defense Department must go back into defense, he said, and "not to any other pet project that the Obama administration deems a higher priority than our security." (Reporting by Jim Wolf; Editing by Gerald E. McCormick and Tim Dobbyn)