NEW YORK (MarketWatch) -- The U.S. Department of Defense ordered General Electric Co. and its partner Rolls Royce PLC to stop development of the F136 jet engine, its first step to formally kill the controversial program to provide the F-35 warplane with an alternate engine.

If the Pentagon gets its way, it will leave Pratt & Whitney, a unit of United Technologies Corp., as the sole engine supplier for the F-35 aircraft, a fifth-generation, single-engine fighter with stealth capability. Its three variants will be used across the armed services and become the backbone of the U.S. combat fleet.

The move sets up a potential showdown between the military and some powerful House members who have supported the second engine’s development, saying the military needs a diversify its supply base to keep up competition.

Congress funded the F136 for years despite military objections. Recently, Defense Secretary Robert Gates said cancelling the program would save the military $3 billion.

“In our view it is a waste of taxpayer money that can be used to fund higher departmental priorities, and should be ended now,” the Pentagon said in a statement.

GE said it would self-fund the program as it looks to its allies in Congress to rally support.

“Everyone knows competition saves money. Our supporters in Congress are more determined than ever, and are encouraging us to press the merits of our case,” the company said in a statement.

Shares of United Technologies UTX rose about 1% to close at $82.76, following the wider market. Shares of GE GE, +1.79% were also up about 1% to $19.78 and U.S.-listed shares of Rolls Royce (RR.) RYCEY, -6.98% were up more than 3% to $9.98.

The stop-work order is for 90 days, pending final resolution of the program’s future, unless extended by the government and the contractor. But for that to happen, Congress would have to revive the program in the face of strong public sentiment to cut government spending.

In February, the House voted to strip the funding for the second engine from its version of the continuing resolution for 2011, which is funding the government as Congress continues to debate the current year’s budget. The administration has also removed funding for the engine in its fiscal 2012 proposal.

By issuing the stop-work order, Gates is taking on House Speaker John Boehner (R., Ohio) and U.S. Rep. Howard McKeon (R., Calif.), chairman of the House Armed Services Committee, who have GE facilities related to the F136 program in their home districts.

“Regardless of the convenient arguments utilized by the Department of Defense and others, canceling the engine competition and awarding a sole-source, never-competed contract constitutes the largest earmark in the history of the Department of Defense,” McKeon said, in a statement.

“Going forward, we will explore all legislative options available to us to maintain engine competition in the largest acquisition program in U.S. history,” he said, referring to the troubled F-35 program that has seen its costs soar.

Despite the stop-work order, the Pentagon said the government was still liable for reasonable costs, though the contractor must take steps to minimize the incurrence of costs.