* Move would let self-funded development effort continue
* House Armed Services panel votes 54 to 5 to clear way
* GE cheers move, a blow to rival United Technologies Corp
(Adds Pratt comment, paragraphs 13-14)
By Jim Wolf
WASHINGTON, May 11 (Reuters) - A controversial second engine for the multinational F-35 fighter jet received a boost Wednesday from a U.S. House of Representatives committee preparing its version of a fiscal 2012 defense spending bill.
The House Armed Services Committee voted 54 to 5 to make sure that General Electric Co (GE.N) and Rolls-Royce Group Plc (RR.L) could go on working on their alternate engine using their own funds, despite the Pentagon's formal cancellation of a competitive engine program last month.
The engine powering early production models of the F-35 is built by Pratt & Whitney, a unit of United Technologies Corp (UTX.N). At stake is a business that GE and Rolls say will be worth more than $100 billion in coming decades and that Pratt reckons at about $50 billion.
The panel acted on an amendment to the defense authorization bill put forward by Rep. Robert Andrews, a New Jersey Democrat who has spearheaded a House effort to wring waste from the more than $100 billion the Pentagon spends on arms each year.
The legislation would require that the secretary of defense, at no cost to the federal government, allow for the continued development and testing of the alternate engine if this is self-funded, as GE and Rolls have proposed to do at least through the end of fiscal 2012.
The Defense Department cut off the contractors' access to the hardware after Congress omitted funding for it in a long-delayed budget deal last month to cover U.S. spending for the rest of fiscal 2011, which ends Sept. 30.
GE and Rolls have offered to spend more than $100 million of their own to go on working on the alternate engine, a move hailed by the House panel's chairman, Howard McKeon, as a potential watershed for how the Pentagon finances arms development.
McKeon, a California Republican, welcomed Andrews' amendment as a "no brainer" that would be good for taxpayers, competition, and U.S. national security.
GE cheered the move, which still must be adopted by the full House and Senate and signed into law by President Barack Obama.
"This gives us the opportunity to advance the technology on an engine that's 80 percent complete," said Rick Kennedy, a GE spokesman. "It's difficult to advance the engine technology without access to the actual engines."
The hardware and related intellectual property belongs to the U.S. government. The Pentagon has sought for five years to kill the alternate engine as unnecessary and wasteful amid growing fiscal pressures. The Pentagon's position on the program has not changed, a spokeswoman said last week in response to the GE-led team's renewed push to keep its engine hopes alive.
The United States has spent about $2.9 billion to develop the second engine since 1997, when the concept of competing engines for the F-35 was initiated, and about $1 billion more would be needed to complete it, GE says.
Pratt spokesman Mary Hauser said the amendment approved by the Armed Services Committee would be a waste of taxpayers' dollars to unnecessarily revive a canceled program.
"This is a testament to how hard it is to kill a program in Washington. This provision is nothing more than a backdoor earmark that will put taxpayers on the hook for millions of dollars," Hauser said.
The Pentagon has said it would cost $2.9 billion more to develop the engine to the point that it could vie against Pratt for orders.
The radar-evading F-35, built by Lockheed Martin Corp (LMT.N), is the Pentagon's costliest arms purchase at some $382 billion for what are now due to be 2,443 planes.
Eight countries have joined the United States to co-develop the jet: Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark and Norway. (Editing by Maureen Bavdek, Phil Berlowitz)