PARIS --- The unit cost of a Pratt & Whitney engine for the troubled Lockheed Martin F-35B STOVL variant has increased to $27.78 million, according to a contract announced by the Pentagon on April 21.
The announcement said the Pentagon would pay $111.13 million for four F135-PW-600 engines, or $27.78 million each.
Remarkably, this is an increase of 15% since Nov. 21, 2019 – five months ago to the day -- when the Pentagon awarded a previous engine contract which included ten F135-PW-600 engines for $240.9 million, or $24.1 million each.
The Pentagon announcements provided no explanation of the increase. A spokeswoman for Pratt & Whitney declined to comment the price increase this morning, and referred all queries to the F-35 Joint Program Office, which did not respond outside of office hours in the U.S.
Pratt & Whitney responds:
On April 28, however, Pratt & Whitney responded to this article and disputed our analysis of the contracts. The company's new European spokesman provided the following explanation:
"The unit cost of the ten F135 STOVL propulsion systems in the November 2019 contract award is effectively the same as for the four engines awarded in April 2020, not 15% higher as the article states. The difference in pricing within the two DoD contract notices is due to $35M of Long Lead funding awarded in April 2019 for the engines that were fully funded in November -- the November announcement was only for the incremental amount. The USMC Plus UP options, announced in April 2020, were never awarded any long lead funding, so the funding reflected the full price."
We have no way of confirming Pratt's explanation, and note that both contract announcements (see following items) mention that they are "modification[s] to a previously-awarded....contract," without mentioning whether long-lead items had been previously funded.
What is clear, however, is that the F-35B's F135-PW-600 engine now costs $27.78 million each -- something that Pratt & Whitney does not dispute.
We have left the rest of this article unchanged, to wllow readers to draw their own conclusions.
(Separately, the F-35 Joint Program Office has still not responded to our questions regarding the engine's cost.)
The increase of $3.7 million per engine is equivalent to +15% in five months (or 36% on an annual basis), or exactly ten times higher than the annual inflation rate in the United States, which according to U.S. Labor Department data published on April 10, 2020 was 1.5% for the 12 months ended March 2020.
While an annual inflation rate of 36% in a procurement program raises questions of contractual oversight and ethics, it also clearly contradicts Pentagon claims that it continues to reduce F-35 production costs.
Announcing a $34 billion contract for 478 additional F-35 aircraft on Oct. 29, 2019, undersecretary of defense for acquisition and sustainment Ellen M. Lord said that “there's a per-unit cost reduction for each variant of the aircraft that averages around 12.7%,” which seems difficult to reconcile with STOVL engine costs that are increasing by 36% on an annual basis.
The contract announcements of Nov. 21 (P00014) and April 21 (P00019) are both modifications to the same contract (N00019-18-C-1021), confirming that both conform to the same terms and are thus directly comparable.
Furthermore, both contracts are due to be completed at approximately the same time, in April and July 2022.
Both contracts are reproduced below with the salient points highlighted in bold typeface.
-- April 30, 2020 @ 16:00 CET: Added Pratt & Whitney's response to this article and amended headline. (Original headline was "Unit Cost of F-35B Engine Jumps 15% in 5 Months to $27.8M"