Abstract:
This case provides a detailed account of a competition between Pratt and Whitney and General Electric fostered by the US Air Force for a $17 billion contract to build fighter engines. The case presents background on the Air Force's contractual problems with Pratt and Whitney on an earlier fighter engine program, and then recounts how a relatively small-scale development program for a similar GE prototype allowed the Air Force to have a competition between the two engines in 1983, and how the Air Force and each firm addressed the new business environment. Addressed are government's and industry's joint responsibility for military technology of this kind, the leverage the sole-source position gives contractors, the economic and operational issues involved in introducing competition, how this kind of competition differs from more normal markets, how the merits of competition are addressed both before and after actual competitive awards, and how life-cycle cost, warranty, and parts considerations came to guide the Air Force's strategy. The case is intended to serve as a graphic introduction to a wide range of common procurement issues, and to illuminate through the example of the engine war the complexity of attempts to make large-scale changes in procurement practices.
