Page 1 GAO-06-717R JSF Alternate Engine Program 

United States Government Accountability Office

Washington, DC 20548 

May 22, 2006 

The Honorable John Warner 

Chairman 

Committee on Armed Services 

United States Senate 

The Honorable Curt Weldon 

Chairman 

Subcommittee on Tactical Air and Land Forces 

Committee on Armed Services 

House of Representatives 

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

Engine Program Was Not Based on a Comprehensive Analysis

The Department of Defense (DOD) expects to purchase about 2,400 Joint Strike 

Fighter (JSF) aircraft, with potential international sales of 2,000 to 3,500 aircraft. 

When the number of aircraft engines and spare parts expected to be purchased is 

considered—along with the lifetime support needed to sustain the engines—the 

future financial investment will be significant. 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. 

Since then, DOD has invested $1.2 billion in the alternate engine program, and, in 

August 2005, it awarded a $2.4 billion contract for system development and 

demonstration of an alternate engine. However, in its fiscal year 2007 budget 

submission, DOD proposed canceling the alternate engine program. Concerned 

whether this decision was based on sound analysis, you asked us to review DOD’s 

rationale for canceling the program and the analysis supporting it, including the life 

cycle savings, benefits, and risks assessed. 

To determine DOD’s rationale for and analysis supporting the decision to cancel the 

alternate engine program, we obtained and discussed data from the Office of the 

Under Secretary of Defense for Acquisition, Technology, and Logistics; the Office of 

the Director of Program Analysis and Evaluation; and Air Force and Navy acquisition 

offices. We also interviewed officials from the Office of the Director, Operational Test 

and Evaluation, and the F-22A engine office, the predecessor engine for the JSF 

engine. We reviewed the data, analyses, assumptions, and results of two prior 
Page 2 GAO-06-717R JSF Alternate Engine Program 

program management advisory group studies1

 and the justification briefing provided 

to Congress by the department. The advisory group studies and briefing were 

identified as the analytical underpinnings of the decision. We also met with the Air 

Force executive who co-led both advisory groups and was the Air Force’s propulsion 

product group manager. Finally, the JSF program office stated that it was not 

involved in the termination proposal. In performing this review, we used data and 

information from that office collected on other assignments. We performed our 

review from March to April 2006 in accordance with generally accepted government 

auditing standards.

SUMMARY 

DOD’s decision to cancel the JSF alternate engine program was driven by the need to 

identify sources of funding in order to pay for other priorities within the department. 

In making the decision, the department did not conduct a new and comprehensive 

analysis, but instead relied on selective elements of two prior studies done in 1998 

and 2002. In supporting the decision to cancel, officials focused only on the potential 

up-front savings in engine procurement costs. They did not, however, consider the 

full long-term savings that might accrue from competition for providing support for 

maintenance and operations over the life cycle of the engine. Both prior studies had 

recommended proceeding with the alternate engine program, despite the lack of 

significant procurement cost savings, because of a number of other benefits 

competition was likely to provide. Also in supporting the decision to cancel, officials 

cited favorable progress made by the primary JSF engine and its predecessor F-22A 

engine as reducing operational risks from a single source. However, the primary JSF 

engine has completed only a small portion of its ground tests and has not yet been 

flown, while the F-22A engine has completed about 10 percent of its hours needed for 

system maturity and is not currently meeting some reliability goals. Further, experts 

from one early study concluded that the commonality with the F-22A engine is of 

limited benefit for reducing development risk of the JSF engine. 

DOD’S RATIONALE FOR TERMINATING THE ALTERNATE ENGINE 

PROGRAM 

The decision for canceling the JSF alternate engine program was driven by budget 

needs outside the JSF program. The decision was a consequence of budget-cutting 

exercises to meet Office of the Secretary of Defense (OSD) spending targets and to 

begin implementing Quadrennial Defense Review (QDR) decisions. The alternate 

engine program was deemed to have a lesser priority than other major DOD activities 

and programs. DOD officials and the justification briefing stated that the rationale 

for canceling the program was no net cost savings from competing engine buys and 

minimum operational risk from relying on a single source. 

 

1

 Advisory groups composed of DOD and foreign partner representatives from the technical, 

operational, and financial communities were established under the aegis of the Assistant Secretary of 

the Navy for Research, Development, and Acquisition to review technical and programmatic issues of 

the alternate engine program, determine its costs and benefits, and make recommendation for either 

continuing or terminating the program. 
Page 3 GAO-06-717R JSF Alternate Engine Program 

Funding for the alternate engine was included in the Navy’s and Air Force’s initial 

2007 budget submissions, according to the services’ acquisition officials. However, 

because of budget constraints, OSD directed the military services to identify 

alternative sources for reducing the fiscal year 2007 future years defense budget. 

Both services proposed the termination of the alternate engine program. DOD 

officials estimated that canceling the program would result in savings of about $2 

billion over the remaining 8 years of the alternate engine development program, 

which could then be used to fund higher-priority programs. In recent testimony, the 

Under Secretary of Defense for Acquisition, Technology, and Logistics stated that the 

department ultimately concluded that maintaining two engine suppliers for the JSF 

program was not the most efficient use of its resources. Department officials also 

noted that the primary engine development program was progressing well, making a 

second engine program unnecessary. On the basis of its assessments of the progress 

of the primary engine for the JSF, the F-22A engine (which served as the basis for the 

primary JSF engine), and past fighter engine experience, officials deemed operational 

risks associated with a single engine supplier acceptable. 

DOD’S DECISION TO CANCEL THE ENGINE COMPETITION WAS BASED 

ON INSUFFICIENT COST, SAVINGS, AND PERFORMANCE DATA 

DOD did not conduct an up-to-date, comprehensive analysis of the total life cycle 

costs, savings, and benefits to support its decision to terminate the JSF’s alternate 

engine development program. Instead, DOD officials used two prior studies and 

considered the savings from engine procurement only, excluding potential life cycle 

cost savings associated with supporting, operating, and maintaining the fleet. These 

officials also stated that the operational risk from relying on a single supplier is 

reduced by favorable test and operational experiences with the primary JSF and F22A engines. However, this assessment is based on: 

• limited ground testing of the primary JSF engine and no actual flight test results; 

• experience with the F-22A engine, which has only completed about 10 percent of 

the operational flight hours needed to achieve system maturity and which has still 

not achieved its reliability goal; and 

• comparisons with the F-22A engine, which will likely have different operational 

uses than the JSF engine. 

DOD’s Decision Is Not Supported by a Current and Comprehensive Analysis 

of Costs and Benefits 

DOD officials stated that the decision to cancel the JSF alternate engine program is 

based largely on studies conducted in 1998 and 2002 by program management 

advisory groups. These groups recommended that DOD proceed with the alternate 

engine program, noting that the recommendation was made independent of the 

services’ abilities to fund the program. The advisory groups determined that 

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

responsiveness, industrial base, readiness, and international relations. They also 

reported finding marginal benefits in the areas of cost savings and additional engine 
Page 4 GAO-06-717R JSF Alternate Engine Program 

growth capabilities (ability to add future engine improvements), and no benefit to 

reducing development risk without restructuring the program. Table 1 provides a 

summary of the program management advisory group study results. 

Table 1: 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  ́  ́ 

Development risk reduction  ́  ́

Engine growth potential  ́  ́ 

Fleet readiness  ́  ́ 

Industrial base  ́  ́ 

International implications  ́  ́ 

Other considerationsa  ́  ́ 

Overall  ́  ́ 

Source: DOD (data); GAO (analysis and presentation). 

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

at the engine subsystem level.

DOD’s current conclusion that net savings from an alternate engine program would 

be negligible at best was largely based on a break-even analysis in the 2002 study that 

calculated how many engines would need to be purchased at prices reflecting savings 

from competition to recover the costs incurred to develop the second source. The 

analysis used the total projected costs of the alternate engine development program, 

an estimated $2.8 billion at that time.2

 However, DOD has now invested about onethird of that total since the 2002 study. Excluding these sunk costs and basing the 

break-even analysis on development costs to go from this point forward would 

reduce the engine costs that would need to be recovered through cost savings 

associated with ongoing competition between engine suppliers. For example, on the 

basis of the estimated development costs to go and using the same assumptions and 

data as the 2002 study, we estimate that achieving 20 percent savings from 

competition would allow a break-even point to occur at about 1,700 engines—not 

2,500, as projected in the 2002 study. An earlier break-even point in the purchase of 

engines would increase the potential for savings over the life of the program. 

Officials indicated that DOD’s decision did not consider all the costs and savings over 

the projected 30-year life cycle of the weapon system. A life cycle cost-benefit 

analysis would consider all the potential costs and savings associated with the 

competition, including operations and support, over the expected life of the system. 

DOD did not analyze the potential impact that a second supplier and supply chain 

could have on long-term support costs for buying spares, engine parts, and 

maintenance services. Given that a large percentage of a fighter aircraft’s total life 

cycle costs are incurred after it has been acquired and fielded, potential savings from 

competition could be significant. Competition could also yield savings through 

reliability improvements. The 1998 study stated that a 10 percent improvement in 

 

2

Dollars are fiscal year 2002 constant for comparison with the 2002 DOD break-even analysis. 
Page 5 GAO-06-717R JSF Alternate Engine Program 

reliability could allow the user to omit one heavy maintenance cycle of the engine, 

saving $3 billion in operating and support costs, and concluded that the costs for 

developing the alternate engine would likely be recovered through production and 

operational cost savings. The 2002 study did not quantify potential operations and 

support savings, but supported the earlier study’s conclusions on the benefits from 

competition. 

Finally, DOD officials indicated that the decision to cancel the engine competition did 

not fully consider the other, less quantifiable benefits that were strongly considered 

by the program management advisory groups in recommending the continuation of 

the program in 1998 and 2002. These studies concluded an alternative engine 

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. 

Many of these were important benefits realized by past competitions such as that for 

the Air Force’s F-16 engines. While these benefits are difficult to quantify, the Air 

Force engine manager who co-led both advisory group studies explained that they 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. 

More Engine Performance Data Are Needed to Reduce Operational Risks 

Despite DOD officials’ assertions that testing to date has reduced risks, there has not 

been sufficient testing to demonstrate that the primary JSF engine will perform as 

expected. At the time of the decision to cancel the alternate engine, the primary JSF 

engine had only completed about 4,600 hours of ground tests—about one-third of the 

hours planned—and had not yet been flight-tested in a JSF aircraft. The first flight of 

the conventional takeoff and landing variant aircraft is not expected until October 

2006. First flight of the short takeoff and vertical landing variant is scheduled for 

early 2008, and the carrier variant in early 2009. The first dedicated operational 

testing that will measure the JSF’s operational effectiveness and suitability is 

scheduled for 2011. Specific propulsion flight testing starts out slowly and begins to 

increase significantly beginning in 2009 (see fig. 1). 
Page 6 GAO-06-717R JSF Alternate Engine Program 

Figure 1: Planned Propulsion Performance Flight Testing and First Flights for the 

Three JSF Variants

The maturity of the JSF engine is also reflected in the program’s contract strategy, in 

which initial production orders for the JSF engines will be on a cost reimbursement 

basis. This type of contract is used when the uncertainties involved in contract 

performance do not permit costs to be estimated with sufficient accuracy to use any 

type of fixed-price contract. This places the risk from the uncertainties with the 

buyer—in this case, DOD. The program plans to transition to fixed-price-type 

contracts for the engine when processes stabilize and the system matures, sometime 

before full-rate production begins in 2013. This will shift more risk to the contractor. 

DOD officials also cite the good performance to date of the F-22A engine as reducing 

the risk from relying on a single source, but this argument has several qualifications. 

First, although the JSF primary engine is a derivative of the F-22A engine, the F-22A 

has completed only about 20,000 operational engine hours; this represents about 10 

percent of the 200,000 hours considered sufficient for system maturity. F-22A 

program engine officials noted that while overall performance has been good, the F22A engine is currently not meeting several reliability goals. For example, the 

engine’s mean time between maintenance actions was expected to be 100 hours on 

average at its initial service release in 2002. However, as of April 2006, the engine 

was experiencing an average of 60 hours between maintenance actions. The program 

projects that at system maturity in 2010, the F-22A engine mean time between 

maintenance actions will be about 100 hours, but that is only 50 percent of its 

performance requirement for 200-hour mean time between maintenance actions. 

Officials also cited four other reliability goals, two that are currently being met and 

two that are not being met. 
Page 7 GAO-06-717R JSF Alternate Engine Program 

Second, the two aircraft have different missions and operational concepts that may 

produce different stresses on the engines. The single-engine JSF aircraft is being 

designed to rapidly transition between different air-to-surface and air-to-air missions 

while still airborne. The JSF aircraft design has three variants, each with a different 

operational concept. In contrast, the dual-engine F-22A will primarily be an air-to-air 

fighter that will fly at high speed and high altitude. Both test and engine officials 

stated that the operational environment for the JSF may put more stress on the 

plane’s engine than the operational environment for the F-22A puts on its engine. 

According to engine officials, the fact that the JSF relies on a single engine for its 

performance magnifies any potential problems that it may incur and increases the 

maintenance needed to sustain its readiness. 

Third, the 1998 study stated there was limited commonality between the F-22A engine 

and the JSF engine configurations and for that reason there was limited reduction in 

development risk achieved from F-22A experience. The study stated the 

development risk for the JSF engine was commensurate with a new fighter engine, 

and of particular concern were the high temperature and short takeoff and vertical 

landing integration requirements. Engine and acquisition officials we talked to had 

differing views on the degree of commonality between the two engines and impacts 

on development risk. We note that the development effort on the JSF primary engine 

is expected to cost $5.8 billion, indicating a substantial development effort. 

CONCLUSIONS 

The relative advantages and disadvantages of the JSF alternate engine program can 

change significantly depending upon the factors assessed and considered. In deciding 

to terminate the program in 2007, DOD did not conduct a current and comprehensive 

study of the costs and benefits of the alternate program. It relied on selected 

elements of two older studies that reviewed the JSF alternate engine program in 1998 

and 2002. It focused on the estimated savings to be accrued from the reduced price 

to buy engines based on competition between two sources. It did not consider the 

benefits, including potential cost savings, that might be derived from competition 

during the life of the JSF program—future engine buys, spare parts, maintenance, 

reliability improvements, support improvements, industrial base benefits, and other 

longer-term factors. The two prior studies both concluded that these benefits would 

be substantial and sufficient reason to continue the program. In addition, the 

decision was based on a break-even analysis for the total investment cost (sunk costs 

as well as costs to go) of the alternate engine program. Sunk costs should be 

excluded from the break-even analysis upon which the decision is based, thereby 

lowering the number of engines required to break even. In deciding to cancel the 

competition, DOD determined that it could not afford this program, given other needs 

in DOD and the government. It had to find money for other budget priorities, and the 

alternate engine program was not accorded a high enough priority. The question 

remains whether a more current, comprehensive, and independent study including all 

costs, benefits, and risks—not just up-front procurement costs—would result in a 

different answer that would cause DOD to reconsider its decision to cancel the 
Page 8 GAO-06-717R JSF Alternate Engine Program 

alternate engine program and instead afford it a higher priority and cause it to 

continue the JSF engine competition. 

AGENCY COMMENTS AND OUR EVALUATION 

DOD provided us with written comments on a draft of this report. The comments 

appear in the enclosure to this letter. 

In summary, DOD believes the report is misleading in a number of respects in that 

there are many important issues that deserve more thoughtful and balanced 

consideration than the information presented in our report. It highlights these in its 

comments, which include its beliefs that (1) data showing savings from competition 

do not exist and (2) certain higher costs would exist if the competitive alternate 

engine program continued. We agree that there is a mix of factors that can increase 

and decrease costs as well as influence readiness and the industrial base. However, 

as pointed out in DOD comments, there is currently a paucity of empirical data about 

the costs and benefits of this program; therefore we think the issues raised by DOD in 

its letter need to be considered within an overall and comprehensive analysis of the 

life cycle costs and benefits of a competitive alternate JSF engine program. 

Our tasking, from both the Senate Armed Services Committee and the House Armed 

Services Tactical Air and Land Forces Subcommittee, was to review DOD’s rationale 

for canceling the program and the analysis supporting that decision. It was not our 

tasking to perform the analysis for DOD. Our conclusions were that DOD had not 

conducted a current and comprehensive study of the costs and benefits of an 

alternate engine program over the entire life of the JSF. Instead of undertaking a new 

study, DOD relied on selective elements of two older studies, both of which 

concluded that significant benefits, beyond price savings in the acquisition program, 

justified continuing the alternate engine program. DOD supported and funded the 

alternate engine program in prior years but now believes the program is not costbeneficial and presents a low risk if canceled. We found that the affordability 

pressures caused by other more pressing demands on the DOD budget this year 

caused DOD to look for sources of funding. As a result, DOD viewed the alternate 

engine program as a lesser priority within the agency. 

- - - - - 

We are sending copies of this letter to the Honorable Donald H. Rumsfeld, Secretary 

of Defense; the Honorable Michael W. Wynne, Secretary of the Air Force; and the 

Honorable Donald C. Winter, Secretary of the Navy. We will make copies available to 

other interested parties upon request. The letter is also available at no charge on the 

GAO Web site at http://www.gao.gov. 
Page 9 GAO-06-717R JSF Alternate Engine Program 

Please contact me at (202) 512-4841 if you or your staffs have any questions. Contact 

points for our offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Other major contributors to this letter were Mike Hazard, 

Matt Lea, Bruce Fairbairn, and Gary Middleton. 

Sincerely yours, 

Michael J. Sullivan, Director 

Acquisition and Sourcing Management 

Enclosure 
Enclosure 

Page 10 GAO-06-717R JSF Alternate Engine Program 

Comments from the Department of Defense
Enclosure 

Page 11 GAO-06-717R JSF Alternate Engine Program 
Enclosure 

Page 12 GAO-06-717R JSF Alternate Engine Program 

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