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Defense: No Alternative

How Pratt & Whitney Held Its Ground Against GE on the F-35 Engine

The long-running battle over who will build the engines for the military’s next generation of fighter jets is in many ways a classic Washington clash, with scores of billions of dollars in business at stake and well-oiled advocacy machines playing the usual politics of Pentagon procurement.

But in the past couple of years the blood feud over the engine — which has pitted two longtime rivals in the world of big-money defense contracting, General Electric Co. and Pratt & Whitney — has become emblematic of the approach to lobbying that is the default setting across so much of Washington these days. Now the game is much more about keeping what you have than about getting more of what you want.

That is certainly true for Pratt & Whitney, which appears to have withstood every one of GE’s challenges and hung on to sole possession of its business building the engines for the F-35 Joint Strike Fighter.

“I certainly feel like we’ve been playing a whole lot more defense than offense,” said David Manke, vice president for Aerospace and Defense Policy at United Technologies Corp. which is Pratt & Whitney’s parent.

And playing defense has come naturally to the company. For the past decade it has been the current principal manufacturer of the engines, a job for which it was chosen by the airplane’s lead contractor, Lockheed Martin. But holding on to that position has not been simple or easy. That’s because for the previous 15 years Congress has insisted — despite the Pentagon’s objections for the past four years — on also funding GE’s version of the F-35 engine, which is made primarily in Ohio and Indiana. (The Pratt & Whitney machine is made mostly in Connecticut.)

For those 15 years, the rationales for funding a second engine have been twofold. One, the resulting competition would result in less-
expensive and higher-quality hardware coming off both assembly lines. Two, it was prudent national security policy to have an alternative at the ready in case the first-choice engine developed problems, because the United States would be seriously vulnerable if thousands of aircraft had to be grounded simultaneously.

In fact, GE’s allies said, those benefits are precisely what accrued when the same two companies vied in the 1980s over the engine for the F-16 in what had become known as the “Great Engine War.”

The principal argument against a second manufacturer, on the other hand, has been simple and long-lasting: The country cannot afford a redundancy, and at such a high price, that has such a small chance of being necessary.

Pentagon Vs. Congress

Starting in 1995, Congress required that the F-35 have two sources for its engines, with each theoretically vying for a larger share of the business based on performance and cost.

But after fully a decade of funding the development of both types of engines, President George W. Bush changed course and proposed doing away with the backup. The several billion dollars needed to finish developing the GE engine (estimates vary depending on whom you ask) was deemed to be too steep, particularly as the overall jet program’s costs were starting to get out of control.

The Pentagon plans to buy more than 2,400 of the F-35 during the next several decades, with different models for the Air Force, Navy and Marine Corps. It is the most expensive weapon program ever, and each plane is now projected to cost, on average, twice what was estimated a decade ago. Including the costs of keeping the jets aloft for several decades, the grand total price tag for the program is about $1.4 trillion.

Several studies have been done on the cost implications of buying two versions of engines instead of one. Their conclusions have varied, as have their assumptions. Most of the assessments have concluded there would be some level of savings from competition, especially if it extended beyond procurement to include support work. But they differed on whether the savings would be enough to offset the costs to finish developing the GE engine.

The Pentagon holds that while the big up-front costs are certain, the potential for big long-term savings is uncertain. Donald Rumsfeld was the first Defense secretary to push back against the second engine. His successor, Robert Gates, also argued against it. And the person who’s on course to be confirmed in the coming days, Leon Panetta, says one engine will suffice.

But Congress disagreed — repeatedly — from fiscal 2007 through fiscal 2010. In fact, virtually every chairman or ranking member of the defense-authorizing and -appropriating committees since Rumsfeld’s Pentagon first tried to kill the GE program has held that ongoing competition in the program was best for the military and the taxpayer.

The New Reality

Bush did not get personally involved. But President Obama has. In May 2009, he said opposing the backup engine was part of his effort to “save money by eliminating unnecessary defense programs that do nothing to keep us safe.” And two months later, the Senate voted to effectively bar authorization of the GE engine for another year — a shot across the bow that prompted a rapid acceleration of both companies’ lobbying, public relations and purely political efforts.

Both firms continued to lavish donations to the campaigns of lawmakers, especially those with seats on the two Armed Services committees and the two Appropriations panels. And both intensified their advertising campaigns about the virtues of their engines — spots designed not to woo the general public so much as to sway the relatively tiny inside-the-Beltway community of lawmakers, aides and the news media. The ads seemed ubiquitous on local news radio, Metro platforms and the pages of The Washington Post and the publications that specialize in covering the Capitol: Politico, National Journal, The Hill, CQ Today, CQ Weekly and Roll Call.

Pratt & Whitney’s spots ridiculed the argument for two engines, and Gates reinforced that point of view by saying, “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.” GE, for its part, relied on the notion that policy makers would feel good about the word “competition” — and would side with the company that promised to compete hard and reward the taxpayers with the results.

GE says it cannot separate its F-35 expenses from its overall lobbying spending (the company and its subsidiaries spent more than $39 million last year). And it would not disclose its advertising expenditures. As for Pratt & Whitney, its lobbying expenditures more than doubled last year, to $18 million from about $8 million in 2009, with most of the increase going to advertising for the engines.

GE was able to keep the alternative engine both authorized and funded two years ago, in part because Obama never drew a clear line in the sand against it. But last year he stood more firmly, promising without caveat to veto any bill that funded the program. The clarity of that threat made a difference, several observers said, and lawmakers went home at the end of last fall’s lame-duck session without making any new decision on the question.

But the new year arrived with a dramatically different political dynamic — one featuring a new House Republican majority that owed its very existence to the victories of dozens of new and very fiscally conservative members. Many of them viewed with extreme skepticism the idea of spending hundreds of millions of dollars on a piece of hardware the Pentagon didn’t want. It was clear that GE’s argument in favor of competition, whatever its strengths, could not make the right promises about trimming the project’s costs. And so, after several years of swimming against the current, Pratt & Whitney’s lobbying effort found much less resistance.

The turning point came in February when the House voted — for the first time in 16 years — against funding the backup engine. Forty-seven of the 87 GOP freshmen voted to take the money out of the big spending bill for the current fiscal year, and they were joined by several veteran Republicans who decided that cost had come to outweigh all other arguments.

“In the current environment, it’s been a gift to be a lobbyist going in and not asking for money but saying this is an opportunity to save money,” Manke said. He tells the story of one GOP freshman, whom he declined to name, who told him: “I know there’s going to be pictures of me next to schools closing and hungry kids, but I’d like to be able to vote for at least one defense cut.”

In April, the Pentagon officially terminated the alternative-engine program. But even now, the story is not quite over. GE is desperately trying to find novel legislative ways to keep its engine in the works even without any direct federal spending, although its odds seem quite long. The company has offered to finance the program itself (albeit with only about a quarter of the nearly half-billion dollars in annual spending it had been allocated) as long as it can retain access to the engines, which the Pentagon owns, and can use testing facilities, for which GE would presumably reimburse the government. A month ago the House endorsed that goal-line-stance approach. And these days GE is hoping yet another ad campaign — featuring the slogan “On Our Own Dime” — helps it to persevere.

Pratt & Whitney seems unperturbed. The company didn’t make an effort to try to block or modify the alternative-engine language that got into the House’s defense authorization bill. The company seems confident that it’s already won the biggest battle in the business of defense.

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