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

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.
Published in Defense ARJ, v21 n1 p416-440, Jan 2014. See also ADA597949. The original document contains color images.