WASHINGTON (Reuters) - Pratt & Whitney, a unit of United Technologies Corp (UTX.N), has finalized a contract with the Pentagon for 32 engines to power a fifth batch of F-35 Joint Strike Fighters, according to sources familiar with the negotiations.
The agreement was reached late last week after more than a year of tough negotiations between the two sides, and Pratt ultimately agreed to lower its price by about $20 million (12.7 million pounds), said one of the sources, who was not authorized to speak publicly.
A second source could not confirm that figure, but acknowledged that government officials had repeatedly pressed Pratt to reduce its price given mounting pressures on the Pentagon budget.
The Pentagon awarded Pratt a preliminary contract or “undefinitized contract action” valued at $1.12 billion for 30 engines in December 2011, and industry and military officials have been trying to work out the details ever since.
Pratt had an additional $9.5 million added to the preliminary contract in August 2012 for the two extra engines.
Britain’s Rolls Royce RROYC.UL is the biggest subcontractor to Pratt & Whitney. Lockheed Martin Corp (LMT.N) is the prime contractor for the overall fighter jet, but the government buys the engines separately.
Lockheed finalized its own deal with the Pentagon in December for the fifth batch of jets, which are already under construction at the company’s Fort Worth, Texas plant. It also reached agreement on a preliminary deal for a sixth batch of planes, which Lockheed had been building with its own funds for some time.
Pratt is hoping to secure a preliminary agreement for the engines to power that sixth set of planes within the next few weeks, but no deal has yet been signed, the sources said.
The contract sealed late last week includes 22 F135 conventional propulsion engines for the Air Force models of the F-35, three short take-off vertical landing engines for the Marine Corps models, and seven engines to power the carrier variant of the new warplane for the U.S. Navy.
Details of the agreement were not immediately available. In addition to the engines, it includes logistics and sustainment costs, as well as spares.
Officials at Pratt and the Pentagon’s F-35 program office were not immediately available to comment on the reported contract agreement.
Reporting By Andrea Shalal-Esa; Editing by Richard Pullin