The Senate Armed Services Committee’s (SASC) Pentagon policy bill calls for clamping down on F-35 Joint Strike Fighter cost increases, banning funds for the aircraft’s alternate engine, and maintaining the M1 tank production line.

The panel’s version of the fiscal year 2012 defense authorization bill, which it approved unanimously in closed session last Thursday night, cuts $6.4 billion from the Pentagon’s $671 billion base and war budget proposals and makes a raft of acquisition-policy changes, according to details it released last Friday.

While SASC Chairman Carl Levin (D-Mich.) touted the bill to reporters, Ranking Member John McCain (R-Ariz.) blasted it, saying he wanted tougher F-35 language in it to rein in Lockheed Martin’s [LMT] over-budget and behind-schedule program.

“Unfortunately, the committee chose to authorize millions of dollars in unnecessary and unrequested pork-barrel projects, and rejected my efforts to stop the out of control cost overruns of the F-35 program,” McCain said in a written statement. He pledged to “continue my efforts to fight the egregious and wasteful spending during debate on the floor of the Senate.”

Levin highlighted the F-35 language during a conference call last Friday. The bill states the low-rate-initial-production (LRIP)contract for the lot 5 aircraft under negotiation must be fixed-priced, as planned, and require Lockheed Martin pay all costs that exceed the target amount. The current approach is for cost overruns to be shared by the contractor and government.

Levin called this “a rather unique approach to procurement,” taken “so that the Pentagon in their current negotiations would know that at least the…(Senate) Armed Services Committee, is going to take strong action.” He and said the committee weighed other cost-controlling measures including having this new plan, for Lockheed Martin to pay all extra costs, apply to the existing contract already in place for the lot 4 aircraft.

The bill “could be even further strengthened on the (Senate) floor if we could figure out a way to apply it to the existing contract to rein in the costs, these huge cost overruns, which have taken place in too much of our procurement,” Levin said.

The SASC’s bill also calls for the Pentagon acquisition chief to report to Congress on a plan for implementing the Weapon Systems Acquisition Reform Act of 2009 for the F-35 JSF program. The legislation authorizes the full funding request for buying 32 F-35s.

The bill not only fails to authorize funding for the F-35’s alternate engine, but expressly “prohibits the use of funds for research, development, test, and evaluation” of it, according to the committee.

Levin said he remains a supporter of the General Electric [GE]-Rolls-Royce engine, which the White House opposes. The Pentagon terminated the program in April after Congress voted to kill FY ‘11 funding for it. The contractor wants to spend its own money to continue developing it in FY ’12, and the House-passed defense authorization bill would allow it to do that. The engine is not funded in the defense appropriations bill the House will debate this week, and Senate Appropriations Committee Chairman Daniel Inouye (D-Hawaii) cast doubt on his chamber funding it.

Levin said even though the SASC bill prohibits the use of Pentagon funding for the second engine, General Electric-Rolls-Royce has offered to use its own funds.

He said he supports having two F-35 engines “more so now than ever,” citing delays with the overall F-35 program. The SASC asked the Pentagon to reassess a business-case analysis from its Cost Assessment and Program Evaluation office (CAPE) last year that stated continuing development of both the alternate and primary engine would cost roughly the same as pursing just the F135. The CAPE, though, advised against continuing the second engine, noting it would not save money. Levin believes current F-35 developments, including a cost overrun with the primary engine, could tip the scales in favor the alternate engine.

The SASC’s Airland committee voted for the alternate-engine language, which was not debated by the full committee, Levin said. The Airland panel is chaired by Sen. Joseph Lieberman (I/D-Conn.), whose state is home to Pratt & Whitney [UTX], the maker of the F-35’s primary engine.

The committee’s bill also calls for adding $322 million to the Pentagon’s request to upgrade 49 additional M1A2 tanks so that the Army doesn’t have to temporarily shut down the production line. Both the House-passed defense authorization bill and the appropriations legislation it will weigh this week add funding to prevent the planned tank production halt from 2013 to 2016.

“Does it make sense to…spend the money on modernizing tanks at the minimal level to keep that production line going, or does it make sense to spend money on closing costs and reopening costs?” Levin said. The committee chose the first option.

The SASC legislation also calls for cutting all of the $406.6 million the Pentagon requested for the Medium Extended Air Defense System (MEADS) program, a three-nation air-defense program that under current plans the United States would have to pay $800 million to exit in 2014. The Pentagon planned to stick with the program until 2013 to avoid contract-termination costs. But Levin said the SASC could not justify spending the $406.6 million–roughly half of the projected cost to leave MEADS–because the Pentagon has no intention of using the final product. Lockheed Martin is among the contractors working on MEADS.

The SASC bill, according to a summary, also would:

– require the Navy “restructure plans to replace the canceled Expeditionary Fighting Vehicle System and to complete analysis of the Amphibious Combat Vehicle alternatives before launching into a Marine Personnel Carrier acquisition program;”

– authorize requested funding for developing the future Army Ground Combat Vehicle and Air Force bomber;

– mandate the defense secretary transfer the Air Force C-12 Liberty intelligence, surveillance, and reconnaissance aircraft to the Army; and

– trim proposed funding for F/A-18E/F aircraft ($495 million cut), the KC-46A tanker ($127.1 million), light-attack-armed-reconnaissance aircraft ($158.5 million), Enhanced Medium Altitude Reconnaissance and Surveillance System aircraft ($451.9 million), Brigade Combat Team Modernization projects ($192.3 million), Joint Tactical Radio System radios ($200 million ), and the Joint Improvised Explosive Device Defeat Organization ($265 million in the war-funding account).

The SASC legislation contains an array of acquisition-policy provisions, including changes to the congressional reporting requirement for so-called Nunn-McCurdy cost breaches in weapon systems that result from changes in the quantities of systems the Pentagon buys. The measure also creates a new “Joint Urgent Operational Need Fund” to allow the Pentagon to quickly buy equipment requested by troops in the battlefield.

Levin lamented to reporters yesterday that the White House has not given the SASC any guideline for how much it wants reduced from its FY ‘12 request for a $553 billion base budget and $117.8 billion war-funding plan. Since the Pentagon submitted those requests to Congress in February, President Barack Obama has said he wants to cut $400 billion in security spending by 2023.

The SASC is calling for trimming the Pentagon’s base budget request by $5.9 billion and war funding by $537 million.