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Pratt must push harder to cut F-35 engine cost: Pentagon

A Lockheed Martin F-35B Lightning II joint strike fighter flies toward its new home at Eglin Air Force Base, Florida in this U.S. Air Force
A Lockheed Martin F-35B Lightning II joint strike fighter flies toward its new home at Eglin Air Force Base, Florida in this U.S. Air Force

By Andrea Shalal

WASHINGTON (Reuters) - Pratt & Whitney, the engine-making unit of United Technologies Corp, must redouble efforts to lower the cost of the single F135 engine it builds for the Lockheed Martin Corp F-35 fighter jet, a top U.S. military official said on Monday.

Rear Admiral Randy Mahr, deputy director of the Pentagon's $392 billion F-35 program, said Pratt had slowed its cost-cutting after Congress in 2011 canceled an alternate engine being developed by General Electric Co.

"We have reinvigorated the 'war on cost' that Pratt started and then kind of slowed down on when they got the monopoly," Mahr told industry executives and military officials at an annual conference hosted by the Navy League.

"In no uncertain terms, they've been informed they need to continue to drive the cost down on that engine," Mahr told reporters after his remarks at the conference.

The comments revealed continuing friction between the program office that runs the Pentagon's costliest weapons program and Pratt at a time when the F-35 program chief, Air Force Lieutenant General Chris Bogdan has talked about improved relations with Lockheed, the prime contractor that builds the airplane.

In 2012, Bogdan described relations between Lockheed, Pratt and the government as the worst he had seen in two decades of working on acquisition programs.

Pratt said it had invested $60 million in "a very aggressive" cost-cutting program that had already lowered the cost of the F135 engine by 40 percent.

"We are pursuing cost reductions in every aspect of the program, including supply chain, configuration changes, process improvements, and overhead," said Pratt spokesman Matthew Bates. He said procurement delays affected costs.

Mahr said the government was close to reaching agreement with Pratt on a seventh batch of engines for the new warplane that is being developed for the U.S. military and its allies, but declined to comment on the exact timing of a deal.

Bates said the company hoped to wrap up the negotiations by the end of the second quarter.

The Pentagon finalized a contract worth $1.1 billion for 38 engines in a sixth batch last October, which pushed the cost of the common configuration engine built for the Air Force and Navy models down by 2.5 percent. It did not provide the exact cost.

Mahr said lawyers from the Pentagon's F-35 office were also in talks with Pratt to publicly release details on the cost of the engine, which the government buys separately from the jet.

Pratt argues it should not be required to disclose details about the costs of the engine or spare parts, since that could affect the company's ability to compete in a next-generation engine procurement that the Pentagon is kick-starting with a new $1 billion technology demonstration program.

Bates said other companies that built sole source military engines had successfully argued against releasing pricing data for such competition reasons in the past.

Mahr said the overall F-35 program is making steady progress, although he said some technical issues still needed to be to resolved, including improving the performance of a complex computer-based logistics system called ALIS, and a recent crack in a fan blade on a Pratt engine. The Pentagon was also pressing the industry to lower the cost of building and operating the new jet, and making it more reliable, he said.

(Reporting by Andrea Shalal; Editing by Jeffrey Benkoe and Grant McCool)

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