United States Government Accountability Office

GAO Testimony before the Subcommittees on 

Air and Land Forces, and Seapower and 

Expeditionary Forces, Committee on 

Armed Services, House of Representatives

DEFENSE ACQUISITIONS

Analysis of Costs for the 

Joint Strike Fighter Engine 

Program 

Statement of Michael Sullivan, Director 

Acquisition and Sourcing Management 

For Release on Delivery

Expected at 2:00 p.m. EDT

Thursday, March 22, 2007 

The web version of this report was reposted on May 8, 2007, to reflect a 

change to the text in Figure 1 on page 9 since the original version was 

posted on March 22, 2007. A typographical error was identified in that 

figure wherein the Assumed Savings rates were depicted as 10, 20, and 30

percent. Those savings rates should instead be 10, 15, and 20 percent. The 

change does not affect other numbers in Figure 1 or the rest of the report.

GAO-07-656T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 22, 2007

DEFENSE ACQUISITIONS 

Analysis of Costs for the Joint Strike 

Highlights of GAO-07-656T, a testimony Fighter Engine Program 

before the Subcommittees on Air and 

Land Forces, and Seapower and 

Expeditionary Forces, Committee on 

Armed Services, House of 

Representatives 

The Joint Strike Fighter (JSF) is the 

linchpin of future Department of

Defense (DOD) tactical aircraft

modernization efforts because of 

the sheer size of the program and 

its envisioned role as the 

replacement for hundreds of

aircraft that perform a wide variety 

of missions in the Air Force, Navy, 

and Marine Corps. DOD 

implemented the JSF alternate 

engine development program in 

1996 to provide competition 

between two engine manufacturers

in an effort to achieve cost savings,

improve performance, and gain 

other benefits. This testimony 

focuses on GAO’s cost analysis 

performed in response to Section

211 of the John Warner National

Defense Authorization Act for 

Fiscal Year 2007. We examined the

following areas: (1) sole-source and 

competitive scenarios for 

development, production, and 

sustainment of the JSF engine, 

(2) results of past engine programs

and their related strategies, and 

(3) impact on the industrial base in 

the event of the complete

cancellation of the JSF alternate 

engine program. DOD did not 

provide comments on our findings.

• Continuing the alternate engine program for the Joint Strike Fighter 

would cost significantly more than a sole-source program but could, 

in the long run, reduce costs and bring other benefits. The current

estimated life cycle cost for the JSF engine program under a solesource scenario is $53.4 billion. To ensure competition by continuing 

to implement the JSF alternate engine program, an additional 

investment of $3.6 billion to $4.5 billion may be required. However, 

the associated competitive pressures from this strategy could result 

in savings equal to or exceeding that amount. The cost analysis we 

performed suggests that a savings of 10.3 to 12.3 percent would 

recoup that investment, and actual experience from past engine

competitions suggests that it is reasonable to assume that 

competition on the JSF engine program could yield savings of at 

least that much. In addition, DOD-commissioned reports and other 

officials have said that nonfinancial benefits in terms of better engine 

performance and reliability, improved industrial base stability, and 

more responsive contractors are more likely outcomes under a 

competitive environment than under a sole-source strategy. 

• DOD experience with other aircraft engine programs, including the 

F-16 fighter in the 1980s, has shown competitive pressures can 

generate financial benefits of up to 20 percent during the life cycle of 

an engine program and/or improved quality and other benefits. 

• The potential for cost savings and performance improvements, along 

with the impact the engine program could have on the industrial 

base, underscores the importance and long-term implications of 

DOD decision making with regard to the final acquisition strategy 

solution. 

www.gao.gov/cgi-bin/getrpt?GAO-07-656T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mike Sullivan at 

(202) 512-4841 or sullivanm@gao.gov. 
Mr. Chairmen and Members of the Subcommittees: 

I am pleased to be here today to discuss the Joint Strike Fighter (JSF) 

engine program. The JSF is the linchpin of future Department of Defense 

(DOD) tactical aircraft modernization efforts because of the program’s 

sheer size and envisioned role as the replacement for hundreds of aircraft 

that provide a wide variety of missions in the Air Force, Navy, and Marine 

Corps. DOD implemented the JSF alternate engine development program 

in 1996 to provide competition between two engine manufacturers in an 

effort to achieve cost savings, improve performance, and gain other 

benefits. Today, my testimony focuses on our cost analysis performed in 

response to Section 211 of the John Warner National Defense 

Authorization Act for Fiscal Year 2007.1

 Specifically, it examines the 

following areas: (1) sole-source and competitive scenarios for 

development, production, and sustainment of the JSF engine; (2) results of 

past engine programs and their related strategies; and (3) impact on the

industrial base in the event of the complete cancellation of the JSF 

alternate engine program. While language in the act instructed GAO to 

report on additional elements related to a firm-fixed-price acquisition 

strategy and any other approach that could improve cost or schedule, this 

statement focuses on the areas above, as we determined those to be the 

most viable options under consideration. Appendix I contains information 

about scope and methodology for the cost analysis on which this 

statement is based. We performed our work from January 2007 to March 

2007 in accordance with generally accepted government auditing 

standards. 

The current estimated remaining life cycle cost for the JSF engine program 

under a sole-source scenario is $53.4 billion. To ensure competition by 

continuing the JSF alternate engine program, an additional investment of 

$3.6 billion to $4.5 billion may be required. However, the associated 

competitive pressures from this strategy could result in savings equal to or

exceeding that amount across the life cycle of the engine. The cost 

analysis we performed suggests that a savings of 10.3 to 12.3 percent 

would recoup that investment, and actual experience from past engine 

competitions suggests that it is reasonable to assume that competition on 

the JSF engine program could yield savings of at least that much. These 

results are dependent on how the government decides to run the 

Summary 

 1

Pub. L. No. 109-364, 120 Stat. 2083, 2117-2119 (2006). 

Page 1 GAO-07-656T 
competition, the number of aircraft that are ultimately purchased, and the 

exact ratio of engines awarded to each contractor. In addition, DODcommissioned reports and other officials have said that non financial 

benefits in terms of better engine performance and reliability, improved 

industrial base stability, and more responsive contractors are more likely 

outcomes under a competitive environment than under a sole-source 

strategy. DOD experience with other aircraft engine programs, including 

that for the F-16 fighter, has shown competitive pressures can generate 

financial benefits of up to 20 percent during the life cycle of an engine 

program and/or the other benefits mentioned. The potential for cost 

savings and performance improvements, along with the impact the engine 

program could have on the industrial base, underscores the importance 

and long-term implications of DOD decision making with regard to the 

final acquisition strategy. DOD chose not to provide comments on this 

statement or the cost analysis on which it is based. The JSF program office 

reviewed our findings and made technical comments which were 

incorporated as appropriate. 

The Joint Strike Fighter is DOD’s most expensive aircraft acquisition 

program. The number of aircraft engines and spare parts expected to be 

purchased, along with the lifetime support needed to sustain the engines, 

mean the future financial investment will be significant. DOD is expected 

to develop, procure, and maintain 2,443 aircraft at a cost of more than 

$338 billion over the program’s life cycle.2

 The JSF is being developed in

three variants for the U.S. military: a conventional takeoff and landing 

aircraft for the Air Force, a carrier-capable version for the Navy, and a 

short takeoff and vertical landing variant for the Marine Corps.3

 In addition 

to its size and cost, the impact of the JSF program is even greater when 

combined with potential international sales (expected to be between 

2,000 and 3,500 additional aircraft) and the current U.S. aircraft that the 

JSF will either replace or complement to meet mission requirements. 

Background 

Congress first expressed concern over the lack of engine competition in 

the JSF program in fiscal year 1996 and in fiscal year 1998 directed DOD to 

ensure that sufficient funding was committed to develop an alternate 

engine. Since that time, DOD has initiated multiple studies to determine 

 2

Unless otherwise noted, all dollars in this report are fiscal year 2002 dollars.

3

Eight allied nations are also participating in the JSF program: United Kingdom, Norway, 

Denmark, the Netherlands, Canada, Italy, Turkey, and Australia. 

Page 2 GAO-07-656T 
the advantages and disadvantages of the alternate engine program. DOD 

program management advisory groups conducted studies in 1998 and 

again in 2002, both resulting in recommendations to continue with the 

alternate engine program. The advisory groups determined that developing 

an alternate JSF engine had significant benefits in the areas of contractor 

responsiveness, industrial base, aircraft readiness, and international 

participation. They also reported finding marginal benefits in the areas of 

cost savings and the ability to add future engine improvements. However, 

they found no benefit with regard to reducing development risk without 

restructuring the program. The advisory groups noted that these 

recommendations were made independent of the services’ ability to fund 

the program—meaning overall affordability should be taken into 

consideration. 

In August 2005, DOD awarded a $2.1 billion contract for alternate engine 

system development and demonstration, of which $699 million has been 

appropriated to date.4

 In its fiscal year 2007 budget submission, DOD 

proposed canceling the alternate engine program and eliminated funding 

related to this effort. While Congress restored the majority of the funding 

for that year, DOD again eliminated alternate engine funding in its 

proposed budget for fiscal year 2008.

DOD decided to cancel the alternate engine program prior to the fiscal 

year budget submission, stating that (1) no net cost benefits or savings are 

to be expected from competition and (2) low operational risk exists for 

the warfighter under a sole-source engine supplier strategy. We reported

last year that this decision was made without a new and comprehensive 

analysis and focused only on the potential up-front savings in engine

procurement costs. We stated further that costs already sunk were 

inappropriately included and long-term savings that might accrue from 

competition for providing support for maintenance and operations over 

the life cycle of the engine were excluded from the decision justification. 

Our position was that DOD’s decision to cancel the program was driven by 

the need to identify sources of funding in order to pay for other, more 

immediate priorities within the department. 

DOD did not change the JSF acquisition strategy to reflect its proposed 

elimination of the alternate engine program, and it continues a dual engine

approach. The 2007 Defense Authorization Act has now placed certain

 4

Prior to this contract, DOD had invested $722 million in the alternate engine program.

Page 3 GAO-07-656T 
restrictions on DOD modification of the dual engine approach. According 

to current JSF program plans, beginning in fiscal year 2007, the program 

office will award the first of three annual production contracts to Pratt & 

Whitney for its F135 engine. In fiscal years 2010 and 2011, noncompetitive 

contracts will be awarded to both Pratt & Whitney and to the Fighter 

Engine Team5

 for the F136 engine. Beginning in fiscal year 2012, contracts 

will be awarded on an annual basis under a competitive approach for 

quantities beyond each contractor’s minimum sustaining rate. Full-rate 

production for the program begins in fiscal year 2014 and is expected to

continue through fiscal year 2034. The JSF program intends to use a 

combination of competition, performance-based logistics, and contract 

incentives to achieve goals related to affordability, supportability, and 

safety. Through this approach, the JSF program office hopes to achieve 

substantial reductions in engine operating and support costs. 

Traditionally, operating and support costs have accounted for 72 percent 

of a program’s life cycle costs. 

Without competition, the JSF program office estimates that it will spend 

$53.4 billion over the remainder of the F135 engine program. This includes 

cost estimates for the completion of system development, procurement of 

2,443 engines, production support, and sustainment. Additional investment 

of between $3.6 billion and $4.5 billion may be required should the 

Department decide to continue competition in the JSF engine program. 

This includes additional development, procurement, support, and stand-up

costs for a second engine provider. While Pratt & Whitney design 

responsibilities and associated costs may be reduced under a sole-source 

contract, our analysis shows that competitive pressures may yield enough 

financial savings to offset the costs of competition over the life of the 

program. These results are dependent on how the government decides to 

run the competition, the number of aircraft that are ultimately purchased, 

and the exact ratio of engines awarded to each contractor. Given certain 

assumptions with regard to these factors, the additional costs of having

the alternate engine could be recouped if competition were to generate 

approximately 10.3 to 12.3 percent savings. According to actual Air Force 

data from past engine programs, including for the F-16 aircraft, it is 

reasonable to expect savings of at least that much. Additionally, there are 

Our Analysis of 

Alternatives Suggests 

Competition Benefits 

Could Outweigh Costs 

 5

The Fighter Engine Team is a single company, created in July 2002 by General Electric and 

Rolls-Royce, and formed for the development, deployment, and support of the F136 engine 

for the JSF program. 

Page 4 GAO-07-656T 
a number of non financial benefits that may result from competition, 

including better performance, increased reliability, and improved 

contractor responsiveness. 

Sole-Source Alternative 

Requires Less Short-term 

Investment 

The cost of the Pratt & Whitney F135 engine is estimated to be 

$53.4 billion over the remainder of the program. This includes cost 

estimates for the completion of system development, procurement of 

engines, production support, and sustainment. Table 1 shows the costs 

remaining to develop, procure, and support the Pratt & Whitney F135 

engine on a sole-source basis. 

Table 1: Costs to Complete Pratt & Whitney F135 Engine Program (based on 2,443 

installed engines and spares) 

Cost element Cost (FY02$B)

System development and demonstration costs $1.0

Total engine unit recurring flyaway costs $17.6

Production support costs (including initial spares, training, manpower, 

and depot stand-up) $3.2

Sustainment costs of fielded aircraft $31.6

Total $53.4

Source: JSF program office data; GAO analysis. 

Costs remaining for the JSF engine program can be broken down into four 

categories: 

• remaining system development and demonstration contract costs; 

• engine unit recurring flyaway costs—per unit cost for aircraft, 

based on rate of learning; 

• production support costs related to production spares, training

personnel and equipment, manpower, and depot facilities; and 

• sustainment costs to maintain fielded aircraft based on engine flight 

hour costs and usage rates. 

Stable requirements and funding, a well-defined acquisition strategy, an 

appropriately structured contract, and adequate oversight are keys to 

ensuring the contractor is motivated to perform, especially under a solesource contract where competitive pressure does not exist. In a solePage 5 GAO-07-656T 
source environment, the primary benefit comes from the improved rate of 

progress, or “learning,” achieved by the contractor based on having all 

production activity.6

 In other words, the greater volume of business given 

to a single contactor is expected to translate into efficiency in production

in a shorter time, thereby lowering associated costs. Learning curves must 

be established in a manner so that the contractor is not only intent on 

meeting that curve, but also incentivized to exceed the curve in order to 

achieve cost reductions. Through analysis of program information and in 

conversations with Pratt & Whitney and JSF program office personnel, we 

found examples of initiatives aimed at improving the F135 learning curve. 

Pratt & Whitney has ongoing and planned activities in areas such as supply 

chain optimization, technology development, and manufacturing efficiency

that it hopes will reduce unit costs through the first 5 years of F135 

production.

Having Pratt & Whitney as the single engine manufacturer may also 

provide benefits in terms of simpler design and integration 

responsibilities. Currently, in addition to development of the F135 engine 

design, Pratt & Whitney has responsibility for design and development of 

common components that will go on all JSF aircraft, regardless of which 

contractor provides the engine core. Examples of common components 

include the lift fan and roll posts for the Marine Corps variant, the exhaust 

nozzles, and ducts. This responsibility supports the overall F-35 program 

requirement that the engine be interchangeable—either engine can be

used in any aircraft variant, either during initial installation or when 

replacement is required. In the event that Pratt & Whitney is made the 

sole-source engine provider, future configuration changes to the aircraft 

and common components could be optimized for the F135 engine, instead 

of potentially compromised design solutions or additional costs needed to

support both F135 and F136. 

JSF Engine Competition 

Could Result in Future 

Savings 

In testimony last year, the Under Secretary of Defense for Acquisition, 

Technology, and Logistics reported that DOD preferred a sole-source 

engine strategy for the JSF program. He noted that maintaining two engine 

suppliers for the program would cost, at that time, an additional 

$1.8 billion for the development phase which was not the most efficient 

use of Department resources. In fact, when considering the costs of 

 6

A learning curve represents the relationship between the unit cost of an item and the

cumulative production quantity of that item. 

Page 6 GAO-07-656T 
competition over the full life cycle of the F136 program, the additional 

costs are even greater. The government’s ability to recoup the additional 

investments required to support competition depends largely on (1) the 

number of aircraft produced,7

 (2) the ratio that each contractor wins out of 

that total, and (3) the savings rate that competitive pressures drive. We 

estimated costs under two competitive scenarios; one in which 

contractors are each awarded 50 percent of the total engine purchases 

(50/50 split) and one in which there is a 70/30 percent award split of total 

engine purchases to either contractor, beginning in fiscal year 2012. 

Without consideration of potential savings, the additional costs of 

competition total $4.5 billion under the first scenario and $3.6 billion under 

the second scenario. Table 2 shows the additional cost associated with 

competition under these two scenarios. 

Table 2: Additional Costs for Competition in JSF Engine Program (based on 2,443 

installed engines and spares) 

Additional costs (FY02$B) 

50/50 

Aircraft 

award split

70/30 

Aircraft 

award split

System development and demonstration costs $1.4 $1.4

Total engine unit recurring fly-away costs $3.0 $2.1

Production support costs (including initial spares, training, 

manpower, and depot standup) 

$.13 $.13

Sustainment costs of fielded aircraftaN/A N/A

Total $4.5 $3.6

Source: JSF program office data; GAO analysis. 

a

No additional sustainment costs were considered because the number of aircraft and cost per flight 

hour would be the same under either scenario. 

The disparity in costs between the two competitive scenarios reflects the 

loss of learning resulting from lower production volumes that is accounted 

for in the projected unit recurring flyaway costs used to construct each 

estimate. The other costs include approximately $1.4 billion in remaining 

F136 development costs and $127 million in additional stand-up costs, 

which would be the same under either competitive scenario. 

 7

In conducting our cost analysis of the alternate engine program, we presented the cost of 

only the U.S. aircraft currently expected for production (2,443). These costs assume the 

quantity benefits of the 646 aircraft currently anticipated for foreign partner procurement. 

Page 7 GAO-07-656T 
DOD implemented the JSF alternate engine development program to 

provide competition between two engine manufacturers in an effort to 

achieve cost savings, improve performance, and gain other benefits. For 

example, competition may incentivize the contractors to achieve more 

aggressive production learning curves, produce more reliable engines that 

are less costly to maintain, and invest additional corporate money in 

technological improvements to remain competitive. To reflect these and 

other potential factors, we applied a 10 to 20 percent range of potential 

cost savings to our estimates, where pertinent to a competitive 

environment.8

 Further, when comparing life cycle costs, it is important to 

consider that many of the additional investments associated with 

competition are often made earlier in the program’s life cycle, though 

much of the expected savings do not accrue for decades. Therefore, a net 

present value calculation (time value of money) must be included in the

analysis and, once applied, provides for a better estimate of program rate 

of return. Figure 1 shows the results of our analysis under different 

scenarios and accounting for the time value of money. 

 8

Our review of DOD data as well as discussions with defense and industry experts, 

confirmed this as a reasonable range of potential savings to consider. 

Page 8 GAO-07-656T 
Figure 1: Net Present Value of JSF Engine Competition 

0

27036

28,036

29,036

30,036

31,036

32,036

33,036

34,036

0

27036

28,036

29,036

30,036

31,036

32,036

33,036

34,036

Fiscal year 2002 dollars in millions Fiscal year 2002 dollars in millions

Source: JSF program office data; GAO analysis.

Assumed savings (in percent) Assumed savings (in percent)

10 15 20 10 15 20

Additional costs Additional costs

-619

738

2,096

-72

1,258

2,587

NPV break-even analysis: 50/50 award

Additional costs = $3.3 billion FY 2002

Break-even point = 12.3 percentage savings

NPV break-even analysis: 70/30 award

Additional costs = $2.7 billion FY 2002 

Break-even point = 10.3 percentage savings

Sole

source

cost

Sole

source

cost

Note: Net present value calculated based on fiscal year 2002. 

When we assumed overall savings due to competition, our analysis 

indicated that recoupment of those initial investment costs would occur at 

somewhere between 10.3 and 12.3 percent, depending on the number of 

engines awarded to each contractor. A competitive scenario where one of

the contractors receives 70 percent of the annual production aircraft, 

while the other receives only 30 percent reaches the breakeven point at 

10.3 percent savings. A competitive scenario where both contractors 

receive 50 percent of the production aircraft reaches this point at 

12.3 percent savings.9

 We believe it is reasonable to assume at least this 

much savings in the long run based on analysis of actual data from the 

F-16 engine competition. 

 9

These savings amounts reflect net present value calculations that discount costs and 

savings for both inflation and the time value of money. 

Page 9 GAO-07-656T 
Competition may also provide benefits that do not result in immediate 

financial savings, but may result in reduced costs or other positive 

outcomes to the program over time. DOD and others have performed 

studies and have widespread concurrence as to these other benefits, 

including better engine performance, increased reliability, and improved 

contractor responsiveness. In fact, in 1998 and 2002, DOD program 

management advisory groups assessed the JSF alternate engine program 

and found the potential for significant benefits in these and other areas. 

Table 3 summarizes the benefits determined by those groups. 

Competition Offers 

Potential Benefits beyond 

Financial Savings 

Table 3: 1998 and 2002 Program Management Advisory Group Study Findings on 

the Benefits of an Alternate Engine Program 

Beneficial Marginal No value

Factor assessed 1998 2002 1998 2002 1998 2002

Costs X X

Development risk reduction X X

Engine growth potential X X 

Fleet readiness X X

Industrial base X X

International implications X X

Other considerationsaX X

Overall X X

Source: DOD data; GAO analysis and presentation. 

a

Other considerations include contractor responsiveness, improved design solutions, and competition 

at the engine subsystem level. 

While the benefits highlighted may be more difficult to quantify, they are 

no less important, and ultimately were strongly considered in

recommending continuation of the alternate engine program. These 

studies concluded that the program would 

• maintain the industrial base for fighter engine technology, 

• enhance readiness, 

• instill contractor incentives for better performance, 

• ensure an operational alternative if the current engine developed 

problems, and 

• enhance international participation.

Page 10 GAO-07-656T 
We spoke with government officials from various organizations who 

widely concurred with our analysis of the potential benefits of engine 

competition. Many of these were important benefits realized by past 

competitions such as that for the Air Force F-16 aircraft engines. 

Discussions with the Air Force engine manager who co led both advisory 

group studies explained that these benefits are valuable when trying to 

manage significant numbers of fighter-type engines to ensure combat 

readiness. He told us that problems are magnified when trying to manage a

single engine system, which can require substantial manpower and extra 

hours to keep aircraft flying when engine problems occur. In his opinion,

the benefits of a dual-source engine would outweigh the costs. He stated 

that he had not seen anything that would change this conclusion since the 

last advisory group study was conducted. 

The ability of competition to deliver such benefits is important for the JSF 

program. In addition to considering engine price, the program office has 

identified a range of potential criteria for competition during the 

production and support phases of the program, which could include other 

costs, reliability, and sustainability. It is reasonable to assume that 

competition under these criteria may drive better engine performance and 

reliability over the life of the program. Such improvements can positively 

affect fleet readiness and schedule outcomes while avoiding costs in 

various other areas for the JSF program. 

Another potential benefit of having an alternate engine program, and one 

also supported by the program advisory group studies, is to reduce the risk 

that a single point, systemic failure in the engine design could substantially 

affect the fighter aircraft fleet. Though current performance data indicate 

it is unlikely that engine problems would lead to fleet wide groundings in 

modern aircraft, having two engine sources for the single-engine JSF 

further reduces this risk as it is more unlikely that such a problem would 

occur to both engine types at the same time. Because the JSF is expected

to be the primary fighter aircraft in the U.S. inventory, and Pratt & Whitney 

will also be the sole-source provider of F119 engines for the F-22A 

aircraft,10 DOD is faced with the potential scenario where almost the entire 

fleet could be dependent on similar engine cores, produced by the same 

contractor in a sole-source environment. 

 10The F135 engine is a derivative of the F119 engine, which means many of the same or 

similar parts and processes are used to manufacture both engines. It also means that the 

F135 can benefit from lessons learned or be susceptible to any systemic problems 

associated with the F119. 

Page 11 GAO-07-656T 
Results from past competitions provide evidence of potential financial and 

non financial savings that can be derived from engine programs. One 

relevant case study to consider is the “Great Engine War” of the 1980s—

the competition between Pratt & Whitney and General Electric to supply 

military engines for the F-16 and other fighter aircraft programs. At that 

time all engines for the F-14 and F-15 aircraft were being produced on a 

sole-source basis by Pratt & Whitney, which was criticized for increased 

procurement and maintenance costs, along with a general lack of 

responsiveness with regard to government concerns about those 

programs. For example, safety issues on the single-engine F-16 aircraft 

were seen as having greater consequences than the twin-engine F-14 or 

F-15 aircraft. To address concerns, the Air Force began to fund the 

development and testing of an alternate engine to be produced by General 

Electric; the Air Force also supported the advent of an improved 

derivative of the Pratt & Whitney engine. Beginning in 1983, the Air Force

initiated a competition that Air Force documentation suggests resulted in 

significant cost savings in the program. For example, in the first 4 years of 

the competition, when actual costs are compared to the program’s 

baseline estimate, results included 

Past Engine Programs 

Show Potential 

Benefits from 

Competition 

• nearly 30 percent cumulative savings for acquisition costs, 

• roughly 16 percent cumulative savings for operations and support 

costs, and 

• total savings of about 21 percent in overall life cycle costs. 

While sole-source competitions have been the general rule for engine 

program strategies, evidence shows that when competition was utilized for 

even part of those programs, positive outcomes were often realized. Other 

than the Great Engine War, there have been a number of U.S. competitions 

for modern fighter engines, including those for the F-15, F/A-18, and F-22A

fighter aircraft. During the course of this review, government and 

contractor personnel told us that the difference between these programs 

and the F-16 was that competition was limited to only one phase of the 

program (i.e., program initiation or production phase). For example, the 

General Electric F404 engine, which today powers the Navy F/A-18 aircraft 

and the Air Force F-117A aircraft, was competed in the mid-1980s. In that 

case, the Navy had decided to upgrade the A-6 aircraft to the A-6F model 

with two F404 engines, thereby increasing the number of F404 engines in 

the fleet. The Navy leadership recommended a second source for that 

engine, and Pratt & Whitney was awarded a “build-to-print” contract, 

which meant it would produce additional F404 engines according to the 

General Electric design. While this competition did provide some 

improvements in contractor responsiveness, government and contractor 

Page 12 GAO-07-656T 
officials told us this was not an optimum competitive environment as it 

provided no design competition. 

The Great Engine War was able to generate significant benefits because 

competition incentivized contractors to improve designs and reduce costs 

during production and sustainment. Competitive pressure continues today 

as the F-15 and F-16 aircraft are still being sold internationally. While the 

other competitions resulted in some level of benefits, especially with 

regard to contractor responsiveness, they did not see the same levels of 

success absent continued competitive pressures. 

The economic stakes in the JSF engine program are likely to be high given 

the size of the program, international participation, and the expected 

supplier base. Participation in the development, production, and support 

of the JSF engine program will position Pratt & Whitney, the Fighter 

Engine Team, and their respective supplier base to compete for future 

military development and acquisition programs. According to government 

officials, Pratt & Whitney faces a decline in the area of large commercial 

engines, which could result in a shift of workforce and overhead costs to 

military programs. While it is the sole-source provider of the engine for the 

Air Force F-22A aircraft, production will likely end in 2012 for that 

program. Pratt & Whitney will at a minimum provide at least some of the 

engines for the JSF program, the extent to which is to be determined by 

whether or not the Fighter Engine Team remains a competitor and, if so, 

the amount of contract awards that company can win. Should the JSF 

program suffer substantial schedule slips beyond 2011 or 2012, the gap 

between the end of F-22A production and the onset of JSF production 

could grow, resulting in workforce disruptions or other negative effects. 

JSF Program Could 

Have Long-term

Impact on Industrial 

Base 

General Electric is a significant entity in the market for large commercial 

engines. However, the company faces declining production within its other 

fighter engine programs, such as the Navy’s F/A-18E/F, which could result 

in erosion of specialized skills should the company not continue as a 

participant in the JSF program. While the overall health of the company is

very strong, business decisions as to where to invest company resources 

could favor the commercial side, should military business decline 

substantially. 

Due to the size of the JSF program, the industrial base implications reach 

far beyond Pratt & Whitney and the Fighter Engine Team. With JSF 

contracts awarded to suppliers within both the U.S. and international 

partner countries, JSF propulsion production and support business will 

Page 13 GAO-07-656T 
contribute to the global engine industrial base for almost 60 years. While 

companies that participate are likely to see increased business 

opportunities, if the JSF comes to dominate the market for tactical

aircraft, as DOD expects, companies that are not part of the program 

could see tactical aircraft business decline. 

DOD officials noted in 2006 that canceling the F136 engine program would 

save DOD $1.8 billion in needed investments over the remaining 

7 years of development, which could be used to fund higher-priority 

programs. According to our analysis that figure is now $1.4 billion; and 

does not include the approximately $2.2 billion to $3.1 billion of additional

investments for procurement, production support, and stand-up 

investments necessary for competition. However, our analysis indicates 

that this investment may be recouped under a competitive approach if it 

generates savings of 10.3 to 12.3 percent. Historical data indicate that it is 

reasonable to assume savings of that much and more. Choices made today 

will ripple forward and influence additional, and perhaps even more 

challenging, decisions in the future. The JSF engine acquisition strategy is 

one such choice facing DOD today. The results of our work indicate that

with the proper structure and attention, and the up-front investments, the 

alternate engine can ultimately recover those investments and potentially

provide additional benefits to the program. Prior engine programs and 

more recent DOD studies and analyses also suggest these outcomes to be 

reasonable. DOD is now faced with prioritizing its short-term needs 

against potential long-term payoffs through competition for JSF engine 

development, procurement, and sustainment. 

Mr. Chairmen, this concludes my prepared statement. I will be happy to 

answer any questions you or other members of the subcommittee may 

have. 

For future questions regarding this testimony, please contact 

Michael J. Sullivan, (202) 512-4841. Individuals making key contributions 

to this testimony include Brian Mullins, Assistant Director; 

J. Kristopher Keener; Daniel Novillo; Greg Campbell; Charles Perdue; and 

Adam Vodraska. 

Concluding 

Observations 

Contacts and 

Acknowledgments 

Page 14 GAO-07-656T 
Joint Strike Fighter: Progress Made and Challenges Remain, GAO-07-360. 

Washington, D.C.: Mar. 15, 2007. 

Tactical Aircraft: DOD’s Cancellation of the Joint Strike Fighter 

Alternate Engine Program Was Not Based on a Comprehensive Analysis,

GAO-06-717R. Washington, D.C: May 22, 2006. 

GAO Related 

Products 

Recapitalization Goals Are Not Supported By Knowledge-Based F-22A 

and JSF Business Cases, GAO-06-487T. Washington, D.C.: Mar. 16, 2006. 

Joint Strike Fighter: DOD Plans to Enter Production before Testing 

Demonstrates Acceptable Performance, GAO-06-356. Washington, D.C.: 

Mar. 15, 2006. 

Tactical Aircraft: F/A-22 and JSF Acquisition Plans and Implications 

for Tactical Aircraft Modernization, GAO-05-519T. Washington, D.C.: 

Apr. 6, 2005.

Defense Acquisitions: Assessments of Selected Major Weapon Programs, 

GAO-05-301.Washington, D.C.: Mar. 31, 2005. 

Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike 

Fighter Program with Different Acquisition Strategy, GAO-05-271. 

Washington D.C.: Mar. 15, 2005. 

Tactical Aircraft: Status of F/A-22 and JSF Acquisition Programs and 

Implications for Tactical Aircraft Modernization, GAO-05-390T. 

Washington, D.C.: Mar. 3, 2005. 

Joint Strike Fighter Acquisition: Observations on the Supplier Base,

GAO-04-554. Washington, D.C.: May 3, 2004. 

Joint Strike Fighter Acquisition: Managing Competing Pressures Is

Critical to Achieving Program Goals, GAO-03-1012T. Washington, D.C.: 

July 21, 2003.

Page 15 GAO-07-656T 
Page 16 GAO-07-656T 

Appendix I: Scope and Methodology 

In conducting our analysis of costs for the Joint Strike Fighter (JSF) 

engine program, we relied primarily on program office data. We did not 

develop our own source data for development, production, or sustainment 

costs. In assessing the reliability of data from the program office, we 

compared that data to contractor data and spoke with agency and other 

officials and determined that the data were sufficiently reliable for our 

review. 

Other base assumptions for the review are as follows: 

• Unit recurring flyaway cost includes the costs associated with

procuring one engine and certain nonrecurring production costs; it 

does not include sunk costs, such as development and test, and 

other costs to the whole system, including logistical support and 

construction. 

• Engine procurement costs reflect only U.S. costs, but assumes the 

quantity benefits of the 646 aircraft currently anticipated for foreign 

partner procurement. 

• Competition, and the associated savings anticipated, begins in fiscal 

year 2012. 

• Engine maturity, defined as 200,000 flight hours with at least 

50,000 hours in each variant, is reached in fiscal year 2012. 

• Two years are needed for delivery of aircraft. 

• Aircraft life equals 30 years at 300 flight hours per year. 

For the sole-source Pratt & Whitney F135 engine scenario, we calculated 

costs as follows: 

Development 

• Relied on JSF program office data on the remaining cost of the Pratt 

& Whitney development contract. We considered all costs for 

development through fiscal year 2007 to be sunk costs and did not 

factor them into analysis. 

Production 

• For cost of installed engine quantities, we multiplied planned JSF 

engine quantities for U.S. aircraft by unit recurring flyaway costs 

specific to each year as derived from cost targets and a learning 

curve developed by the JSF program office. 

• For the cost of production support, we relied on JSF program office 

cost estimates for initial spares, training, support equipment, depot 

stand-up, and manpower related to propulsion. Because the JSF 

program office calculates those numbers to reflect two contractors, 

we applied a cost reduction factor in the areas of training and 

manpower to reflect the lower cost to support only one engine type. 
Sustainment 

• For sustainment costs, we multiplied the planned number of U.S. 

fielded aircraft by the estimated number of flight hours for each 

year to arrive at an annual fleet total. We then multiplied this total 

by JSF program office estimated cost per engine flight hour specific 

to each aircraft variant. 

• Sustainment costs do not include a calculation of the cost of engine 

reliability or technology improvement programs.

For a competitive scenario between the Pratt & Whitney F135 engine and 

the Fighter Engine Team (General Electric and Rolls-Royce), we 

calculated costs as follows: 

Development 

• We used current JSF program office estimates of remaining 

development costs for both contractors and considered all costs for 

development through fiscal year 2007 to be sunk costs. 

Production 

• We used JSF program office data for engine buy profiles, learning 

curves, and unit recurring flyaway costs to arrive at a cost for 

installed engine quantities on U.S. aircraft. We performed 

calculations for competitive production quantities under 70/30 and 

50/50 production quantity award scenarios. 

• We used JSF program office cost estimates for production support 

under two contractors. We assumed no change in support costs 

based on specific numbers of aircraft awarded under competition, 

as each contractor would still need to support some number of 

installed engines and provide some number of initial spares. 

Sustainment 

• We used the same methodology and assumptions to perform the 

calculation for sustainment costs in a competition as in the 

sole-source scenario. 

Savings 

• We analyzed actual cost information from past aircraft propulsion 

programs, especially that of the F-16 aircraft engine, in order to 

derive the expected benefits of competition and determine a 

reasonable range of potential savings.

• We applied this range of savings to the engine life cycle, including 

recurring flyaway costs, production support, and sustainment. We 

assumed costs to the government could decrease in any or all of 

these areas as a result of competitive pressures. 

Page 17 GAO-07-656T 
• We did not apply any savings to the system development and 

demonstration phase or the first five production lots because they 

are not fully competitive. However, we recognize that some savings 

may accrue as contractors prepare for competition. 

In response to the request to present our cost analyses in constant dollars, 

then year dollars, and using net present value, we:

• calculated all costs using constant fiscal year 2002 dollars, 

• used separate JSF program office and Office of the Secretary of 

Defense inflation indices for development, production, 

production support, and sustainment to derive then year dollars; 

when necessary for the out years, we extrapolated the growth of 

escalation factors linearly; and 

• utilized accepted GAO methodologies for calculating discount 

rates in the net present value analysis. 

No cost analysis was performed for the scenario where a fixed-price 

contract would be awarded in fiscal year 2008 for the entire life of the 

engine program because neither the contractor nor the Department of 

Defense calculates the necessary cost data. During our discussions with 

both DOD officials and contractor representatives, it was determined that 

neither viewed a fixed-price contract as a viable option for which they 

could quantify a risk premium. 

We did not perform cost analyses of alternative strategies, as we 

determined no other alternative could be implemented without disruption 

to the JSF program’s cost and schedule. 

Our analysis of the industrial base does not independently verify the 

relative health of either contractors’ suppliers or workload. 

(120639) Page 18 GAO-07-656T 
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