March 11, 2010 / 1:51 AM / 9 years ago

Pratt F-35 engine cost overrun up by $600 mln

WASHINGTON, March 10 (Reuters) - The cost overrun on the main engine for the Lockheed Martin Corp (LMT.N) F-35 fighter jet has grown by $600 million over the past year, despite tough cost-cutting measures by engine maker Pratt & Whitney, a unit of United Technologies Corp (UTX.N), a Navy document shows.

The total cost to complete the Pratt F135 engine is now estimated to be $7.28 billion — $2.5 billion more than the $4.8 billion initially projected for the engine, according to the document, which was first reported by Aviation Week magazine on its website on Wednesday.

That is an increase of $600 million from the $1.9 billion cost overrun that was reported last year by the House Armed Services Committee.

Pratt spokeswoman Erin Dick said she was not familiar with the new number, and emphasized that the company’s aggressive cost-cutting measures were taking effect.

Pratt also offered the Pentagon a double-digit percentage reduction in engine cost in its latest contract proposal.

Pentagon acquisition chief Ashton Carter had expressed concerns about cost growth on the Pratt engine last year, but endorsed Pratt’s efforts to cut costs in a memo to F-35 international partners dated February 24, a copy of which was obtained by Reuters.

Carter said a special independent “Joint Assessment Team” he appointed concluded that projected cost growth on the engine could be reduced significantly by investing in affordability measures and through a renewed commitment by Pratt.

“We believe the contractor can realistically achieve its stated cost reduction goals but will continue to monitor its progress,” Carter wrote in the memo.

Congressional aides said they are awaiting additional data on the cost of the engine when the Pentagon sends lawmakers an annual report on acquisition costs on April 1.

But several aides said the latest briefing they received on the F-35 program revealed continued cost growth on the main engine, a development they described as “problematic.”

Carter is implementing a major restructuring of the overall F-35 program, including adding $2.8 billion more to the development phase of the program and slowing down the expected ramp up in production.

He is due to testify at a Senate Armed Services Committee hearing on the F-35 program on Thursday that was requested by Senator John McCain.

McCain’s dogged investigation of wasteful Pentagon programs has led to major acquisition reforms in recent years.

News of the continued cost growth comes just as the Pentagon is redoubling its efforts to cancel an alternate engine for the F-35 fighter that was initiated by Congress as a hedge against problems with a single engine.

Lawmakers defied a presidential veto to fund the second engine built by General Electric Co (GE.N) and Rolls Royce last year and say they’re ready to fight the Pentagon and White House to maintain the program again this year.

A recent Pentagon analysis said it would cost $2.9 billion over six years to complete work on the GE-Rolls engine, but GE and Rolls-Royce say they need just $900 million to complete the development program and $400 million more for tooling.

The Pentagon analysis also concluded that the longer term “life cycle” costs of having two engines were comparable to having only one, although it did not foresee any savings. (Reporting by Andrea Shalal-Esa; Editing by Gary Hill)

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