The US government has terminated a contract that would have completed development of the General Electric/Rolls-Royce F136 alternate engine for the Lockheed Martin F-35 Lightning II.
The order by Ashton Carter, undersecretary of defense for acquisition, technology and logistics, means the Department of Defense can close the F136 production line.
Carter also had the option to dispose of the F136 test engines already delivered, but has instead instructed the GE/Rolls team to preserve and deliver all government property.
The termination follows a "stop work" order issued on 24 March, and comes after President Barack Obama signed an appropriations bill on 15 April that contains no funding for the F136.
The F136 decision is still expected to be revisited next week by the House Armed Services Committee, which is chaired by Rep Buck McKeon, a strong supporter for a competitive engine to challenge the Pratt & Whitney F135 for F-35 orders.
The GE/Rolls team was preparing to propose self-funding a portion of the remaining F136 development costs, with estimates ranging between $1.9 billion and $2.6 billion.
In a 25 April letter to employees, GE chairman Jeff Immelt said the company is "discussing with our supporters in Congress how GE can help fund some of the remaining F136 development costs".
GE also has proposed to sign contracts based on fixed-price rules to cover the remainder of development.
"We believe that common sense will prevail and will preserve the $3 billion already invested in the F136," Immelt says.
The DoD has been trying to eliminate the F136 programme for five years, arguing that any potential cost-savings from competition are out-weighed by the impact of upfront outlays to redundant engine suppliers.
"While we are deeply disappointed by the DoD's 'Notice of Termination,' GE and Rolls-Royce remain committed to the F136 and the significant benefits it brings," the companies said in a joint statement.