ARJ 68

From the Chairman and Executive Editor

DoD Acquisition–To Compete or Not Compete: The Placebo of Competition

William J. Levenson

Commercial markets abound with examples of competitive forces providing reduced costs and increased innovation. However, the defense market is materially different from commercial markets in many ways, and thus does not respond in the same way to competition. This analysis examines a series of outcomes in both competitive and sole-source acquisition programs, using a statistical model that builds on a game theory framework developed by Todd Harrison, Center for Strategic and Budgetary Assessment. The results show that the Department of Defense may actually incur increased costs from competition. Competition in defense acquisition may not reduce costs, but may—like a placebo—create a powerful perception of cost control.

Investigation into the Ratio of Operating and Support Costs to LifeCycle Costs for DoD Weapon Systems

Capt Gary Jones, USAF, Edward White, Lt Col Erin T. Ryan, USAF, and Lt Col Jonathan D. Ritschel, USAF

Recent legislation, such as the Weapon Systems Acquisition Reform Act of 2009, requires a renewed emphasis on understanding Operating and Support (O&S) costs. Conventional wisdom within the acquisition community suggests a 70:30 cost ratio with respect to O&S and acquisition of an average weapon system. Using 37 Air Force and Navy programs, the authors estimate the mean overall ratio of O&S costs to acquisition costs to be closer to 55:45, although many weapon systems displayed significant deviation from this 55 percent average. Contributing factors such as life expectancy and acquisition strategy (i.e., new system or modification) affect this variance. Their research advises against using a single “one-size-fits-all” O&S/ acquisition cost ratio for all major DoD weapon systems.

Strengthening DoD Cyber Security with the Vulnerability Market

Maj Bradley C. Panton, USAF, John M. Colombi, Michael R. Grimaila, and Robert F. Mills

Every year, the Department of Defense (DoD) upgrades its information technology systems, allows new applications to connect to DoD information networks, and reconfigures the enterprise to gain efficiencies. While these actions better support the warfighter and satisfy national security interests, they introduce new system vulnerabilities waiting to be exploited. Often, these vulnerabilities are discovered only after the system has already deployed, where costs to fix are much larger. This article recommends the DoD adopt an economic strategy called the vulnerability market, or the market for zero-day exploits, to enhance system Information Assurance. Through the mutual cooperation between industry and the military in securing information, the DoD optimizes security investments, secures critical information, and provides an effective and resilient warfighting capability.

A Conceptual Framework for Defense Acquisition Decision Makers: Giving the Schedule Its Due

Chad Dacus and Col Stephen Hagel, USAF (Ret.)

Conceptual models based on economic and operations research principles can yield valuable insight into defense acquisition decisions. This article focuses on models that place varying degrees of emphasis on each objective of the defense acquisition system: cost (low cost), schedule (short cycle times), and performance (high system performance). The most appealing conceptual model is chosen, which the authors posit that, if adopted, would lead to shifts in priorities that could facilitate better outcomes, as empirical results suggest. Finally, several policy prescriptions implied by the model are briefly explored.