Analyzing Acquisition Costs

In the analysis below, we consider introducing a second contractor early in the JSF program. Our focus is on what makes sense at the beginning of EMD, which should occur approximately a year after this study. For this study, we have cost data regarding the baseline winnertake-all program from both of the JSF contractors plus the JSF Program Office. The alternative is to introduce competition, for which there is no information. Analyzing the effect of competition on acquisition costs is always complicated by the absence of data regarding the “path not taken” or “the path for which there is no data.” The baseline is no competition, and the alternative is introducing a second contractor at some point during the acquisition process. The second contractor will produce some number of units during the completion of the procurement program. Our approach employs a modification of a break-even analysis technique that was developed several years ago specifically to handle “the path for which there is no data.” The next section describes this approach. The section following it presents analytic results for several possible scenarios for implementing competition in the JSF program. The final section presents the findings of several studies regarding production cost savings, or losses, on past competitive programs and discusses how these results can be used to assess the likelihood that the JSF may be able to achieve savings under competition.