Competition and Innovation in the U.S. Fixed-Wing Military Aircraft Industry

Defense policymakers have expressed concern that further consolidation in the industry that designs and manufactures U.S. military aircraft, which is now at three prime contractors (in contrast to 11 in 1960), will cause the Department of Defense (DoD) to acquire aircraft that are designed and produced in a far less competitive and innovative environment than they were in the past. This report responds to the Senate's request that the DoD prepare a comprehensive analysis of and report on the risks to innovation and cost of limited or no competition in contracting for military aircraft and related weapon systems by examining the future of the U.S. military-aircraft industrial base in relation to specific questions Congress posed. The RAND research team translated the questions into four tasks:

• Describe the military combat-aircraft industry.
• Evaluate what is required to maintain a high level of innovation in the military combat-aircraft industry.
• Assess prospects for innovation and competition in the military combat-aircraft industry.
• Identify policy options open to the DoD.

Our findings indicate that procurement funding will likely be adequate to sustain the basic institutional structure of the current prime military-aircraft contractors through at least the end of the present decade. However, a DoD decision to begin a new major combat-aircraft program before the end of this decade would provide a stronger basis for sustaining current structure and capability. If the number and frequency of major aircraft programs continue to diminish, it will be increasingly difficult to sustain an industry of the present size and posture. The policy questions that need to be addressed are, “What role can the government play and what role should it play in the evolution of industry structure and capabilities that is under way?”

This research should be of interest to members of Congress, congressional staff members, industry executives, and others in the civilian and uniformed defense policy community interested in the future viability of the U.S. military-aircraft industrial base.