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The use of competition in weapon system acquisition is widely reflected in requirements issued by Congress, the Office of Management and Budget (OMB), DoD, and the military services. This emphasis stems from the conviction that competition during the production phase of the acquisition system will drive the unit cost of a system or subsystem down and reduce overall procurement cost to the government. However, it is not self-evident that a second production source will produce savings for the government in every procurement. In this paper, the authors compare the characteristics of a typical business market to those of defense acquisitions, and they identify the benefits and drawbacks of competition in defense acquisitions specifically. Using historical data and RAND's required cost reduction methodology, they also show how DoD can determine when the introduction of competition during production is a reasonable acquisition strategy.

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). Th e research was conducted in the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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