The case for competition in government acquisitions

Ralph Nash Contributor
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Having been engaged in government acquisition issues for more than 50 years, I am befuddled by the debate in Washington over competing engines for the Joint Strike Fighter (JSF).

Department of Defense (DoD) leaders want more competition but reject real, ongoing competition for engines on their biggest aircraft program. If there is any lesson in government acquisition history, it is this: The best form of competition involves two companies competing to supply a product on a year-to-year basis with the winner awarded the larger share and the loser a smaller share so that it can compete the next year.

A pertinent example is “The Great Engine War” on the F-16 program — one of the most successful competitions in government acquisition. In the late 1970s, the U.S. Air Force experienced significant problems with the Pratt & Whitney (P&W) F100 engine powering F-15 and F-16 aircraft. Numerous aircraft were inoperable awaiting engines, and pilots faced engine throttle restrictions on those flying. By 1982, a frustrated USAF created an engine competition for the F-16s, and this “Great Engine War” pitted P&W’s significantly modified F100 engine against GE’s F110 engine. The goal was to achieve one engine with better safety, operability, reliability, durability, and supportability with large reductions in life-cycle costs. To USAF’s surprise, significant cost savings were realized for either 100% award or split buys of two engines. Thus, they chose the obvious advantages of continuing competition through annual awards.

The results were extraordinary. The U.S. Government Accountability Office recently reported that the USAF achieved a 21% savings in five years of the F-16 engine competition, through more responsive contractors and sharply lower acquisition and support costs. The operators now had engines with no operating restrictions, excellent safety, and readiness rates climbed to levels never experienced for fighter engine operations.

In 1996, when the DoD competed prototype Joint Strike Fighter aircraft, the P&W F119 engine (from the F-22) powered them. Also, a competing engine from GE was funded, and was in the JSF budget for 10 years. It was never intended as an alternate engine, back-up engine, or second spare engine — but a fully competitive engine. When Lockheed Martin was selected for JSF, P&W was awarded the engine contract without a competition. However, the DoD and Congress continued to embrace and fund competing engines. The JSF was designated the F-35, and the P&W and GE engines designated the F135 and F136 respectively. In 2002, GE and Rolls-Royce formed a 60/40 joint company to develop and produce the F136.

The JSF engine program is now poised to exceed “The Great Engine War” in terms of savings because the procurement will be much larger. The competing F136 engine is now 80% complete, and will be qualified for production next year. The JSF program will procure 3,000 or more engines — competed on both acquisition and maintenance costs for 15 to 20 years. That’s $100 billion in JSF engine life-cycle cost. GAO concluded that competing JSF engines could reasonably achieve similar savings to those of the “Great Engine War” — savings exceeding $20 billion.

Numerous studies support the huge impact of ongoing competition between real products in defense procurement. In 2007, Dr. Jacques Gansler, a respected former under secretary of defense, found that competition during production drives continuous process and product innovation, resulting in higher performance at lower costs. Competitors achieve steeper learning curves. He further found that 13 defense program competitions since 1964 had achieved 12 to 50 percent net savings through split buys.

Why is the JSF engine competition so important? First, it adopts the best technique for inducing contractors to supply a quality product at a reasonable price. Second, terminating the F136 leaves the U.S. with only one contractor team developing unique state-of-the-art large jet engines for fighter jets.

The “Great Engine War” taught us profound lessons that must not be ignored. The DoD is being penny-wise and pound-foolish by not continuing a competition that will produce better products for significantly less cost over time. The U.S. warfighter and taxpayer will be the real beneficiaries for many decades to come.

Ralph C. Nash, Jr., is Professor Emeritus of Law of The George Washington University, Washington, D.C., from which he retired in 1993. He founded the Government Contracts Program of the university’s National Law Center in 1960, was Director of the Program from 1960 to 1966 and from 1979 to 1984, and continues to be actively involved in the Program. He was Associate Dean for Graduate Studies, Research and Projects, of the Law Center from 1966 to 1972.