Critics of Pentagon waste point to the uncompetitive defense industry — dominated by a handful of conglomerates — as the reason why the U.S. military overpays for weapons. If only there were a truly competitive, free, market, prices would come down, experts have argued.
Reality often trumps that theory, however. Some of the most hair-raising Pentagon acquisition programs — Future Combat Systems, Expeditionary Fighting Vehicle, Joint Strike Fighter come to mind — were competitively awarded after lengthy evaluations and technology trials. Yet, these programs today are held up as poster children for Pentagon acquisitions gone awry.
A respected defense budget analyst now offers a numbers-based hypothesis for why competition in military acquisitions is overhyped as a cure-all for the chronic cost overruns in Pentagon weapon systems.
“While competition has an intuitive appeal as a way to drive down costs in defense acquisitions, this is not always the case,” says Todd Harrison, a senior analyst at the Center for Strategic and Budgetary Assessments, a nonpartisan Washington, D.C., think tank.
“Competition can, under certain circumstances, drive up acquisition costs by incentivizing contractors to bid higher,” Harrison contends in a paper titled, “The Limits of Competition in Defense Acquisition,” published last month by the Defense Acquisition University.
The paper describes a competitive pricing model that allows acquisition managers to “game” how companies are incentivized to bid under different conditions. “The key question for acquisition professionals is not when does competition make sense, but rather when does it not make sense. … And when competition does have the potential to reduce costs, how can it be properly structured to increase the likelihood that savings are realized?” Harrison asks.