Category Archives: Limits of Competition

Knowledge as an Inhibitor to Competition in Defence Acquisition

By Kevin Burgess

The rise of the neoliberal agenda founded on neoclassical economic assumptions over the past thirty years has had a profound influence on the framework used to develop and assess policy effectiveness across all arms of government including defence. As a result the evaluation methods within this framework have tended to been dominated by economic metrics. The weakness associated with using these metrics is that they are poor at measuring intangible assets such as trusted based relations, culture, social networks and knowledge. All of these important intangible assets have a very large impact on competiveness. It is widely agreed that intangible assets play a major role in determining the competitive nature of firms and therefore markets. There are as yet no agreed methodologies or standards by which to evaluate these types of assets. As a result Defence organisations struggle to effectively analyze the impact of these types of assets in their assessment of competitive bids. This paper explores one specific intangible asset “knowledge” and the role it plays in respect to competition. Knowledge is seen as the most relevant intangible asset to explore given the widely reported and generally accepted view that the world is moving from an industrial to a knowledge economy. The trend to outsource ever more knowledge creation activities which were previously carried out within defence and its impact on competitive markets is yet not well understood. This paper identifies key issues associated with knowledge in respect to how it impacts upon competitiveness in defence markets. It concludes with suggestion on how to overcome present limitations associated with the various forms of knowledge in order to improve the effectiveness of defence acquisition.

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Competition Among Near-Substitutable Systems

By Bruce Harmon

We define near-substitutable systems as systems that have overlapping capabilities, but are substantially different in some dimensions. Competition between such systems is examined in the context of the dominant “Weapon System Franchise” model of competition for major defense acquisition programs (MDAPs).

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Analysis of the JSF Engine Competition

By James P. Woolsey, Harold S. Balaban, Kristen M. Guerrera, & Bruce R. Harmon

Typically dual-source competition involves more than one producer building the same build-to-print (BTP) hardware design. A more analytically challenging case occurs when two contractors develop and produce two different designs to meet the same functional requirements. Such a case was examined by the Institute for Defense Analyses in a forward-looking cost and economic analysis of the Joint Strike Fighter (JSF) alternative engine program.

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Competitive Prototyping in the Department Of Defense: Suggestions for a Better Approach

By Samuel Mark Borowski

For at least four times since World War II, competitive prototyping has been highly encouraged, if not mandated, as a preferred approach to major systems acquisition in the Department of Defense. Its repeated encouragement is due in part to its description as a best practice by organizations like the Government Accountability Office, RAND, and specially formed task forces like the Packard Commission. In most instances, competitive prototyping is presented as a tool for stoking creative thought, for improving decision-making, and for leading to better acquisition outcomes. In other instances, its value has been questioned. In practice, competitive prototyping has not always delivered on its promises. Part of its mixed results has been attributed to widespread confusion over the meaning of terms and how prototyping should be pursued on a competitive basis. Building off lessons learned, this paper provides an overview of prototyping accompanied by a description of how competitive prototyping has and could be practiced better within the Department of Defense. The terms “prototype” and “prototyping” are defined as is an approach to competitive prototyping explained. Law and regulation make brief appearances, but both give way to recorded experience. Throughout, lessons learned, best practices, and other considerations are highlighted to better position the Defense Department to implement the competitive prototyping requirements of the Weapon Systems Acquisition Reform Act of 2009.

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Acquiring IT Services: Should DoD Use Single or Double Award Task Orders?

By Joseph R. Daum D.B.A.

Department of Defense organizations can achieve cost savings in the acquisition of Information Technology (IT) services by reducing government and contractor overhead with a Single Award Task Order Contract. Some believe that continued competitive pressure applied using Multiple Award Task Order Contracts is more effective in helping government organizations achieve cost savings. This paper summarizes the current literature on the use of the two contract vehicles in IT services acquisition and discusses the merits of each method. It also analyzes qualitative data from the United States Special Operations Command on the implementation of the two acquisition models. The paper provides recommendations for future empirical research based on the analysis.
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Limits of Competition for Depot Maintenance Contracting

By Nicholas J. Avdellas, PhD and Steven R. Erickson, CPL

Competitive contracting remains a key acquisition and procurement objective for the Department of Defense (DoD) although its application can be substantially constrained for particular applications such as depot maintenance. When it can be applied, public-private competition has been shown to promise cost reductions of as much as 30 percent for depot maintenance, while also promoting innovation through the competitive process. Even though depot maintenance represents a sizable portion of the sustainment budget (more than $30 billion per year), it has particular limitations that reduce the applicability of competitive contracting as well as the actual savings from the competitive process. Key examples of factors that limit competition include the general lack of requisite technical data; the extended timeframes and costs associated with establishing or moving a depot maintenance capability; and the relatively equal results of public-private competitions conducted in the 1990s. As a consequence of these factors, a significant amount of depot maintenance contracts are being awarded on a single-source basis.

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Past Performance as a Indicator of Future Performance: Selecting an Industry Partner to Maximize the Probability of Program Success

By James Bradshaw and Su Chang

The Federal contracting process should enable a government organization to select a contractor that will become a true business partner. Today’s source selection processes provide opportunities to evaluate how well a contractor proposes a solution; however, the government’s processes, policies, and tools are ill suited to evaluating how well a contractor can be expected to deliver on its proposed solutions. Like most government agencies, the Department of Defense (DoD) relies too heavily on the contractor’s proposal—what the contractor claims it can do—versus evaluating past performance to determine what a contractor has proven it can do. The lack of adequate past performance data and processes to effectively evaluate the qualifications of companies, including examples of the contractor’s trustworthiness and key personnel, has contributed to a series of program failures, cost overruns, and schedule delays. Without adequate data and processes to address these issues, the DoD increases its risk of duplicating previous program failures and missing the opportunity to capture this information to prevent repeated mistakes with the same contractor.

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Continuous Competition as an Approach to Maximum Performance

By Ginny Wydler, The MITRE Corporation, Su Chang, The MITRE Corporation,  Erin M. Schultz, The MITRE Corporation

Research shows that continuing competitive pressure applied during development and production leads to better industry performance, often at reduced cost. However, the entrenched practice of one-time competition for an entire program life-cycle often endows the winner with a very strong monopolistic power that lasts for decades. This paper describes continuous competition as leverage to acquire more effective results. It offers an alternative method for continuous competition—Multi-sourcing with Distributed Awards—under an applicable set of conditions and an appropriate business case.1

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Competitiveness in the Private Sector: Understanding the Contracting Data

By Susan L. Rose, Laura M. Williams, and Andrew S. Rehwinkel

The study investigates whether competed service sector contracts with a single offer or sole source awards indicate a lack of qualified firms or significant barriers to entry.

The study concludes that:

  • the prevalence of service sector contracts receiving only a single offer is about half as large as the data appear to suggest; and
  • the use of short-term contracts and modifications to fill the gap in services between the end of one contract and the beginning of the next is a significant source of sole source contracts.

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