IDA Research Notes

  IDA Research Notes is the Institute's semiannual research newsletter which highlights recent analytic activities being conducted by IDA staff. If you are interested in being added to the IDA Research Notes mailing list, please contact Helen Robertson. Please include your name, your organization's name, and mailing address.

Our Fall 2008 issue focuses on IDA's recent analyses of the Resource Analyses. (Download Issue)

Articles include:

• Evaluating the Costs and Benefits of Competition for Joint Strike Fighter Engines (pdf of article) 
• Anallysis and Forecasts of TRICARE Costs (pdf of article)
• Cost Savings from the Post-Cold War Consolidation of the Defense Industrial Base: A Case Study of the Shipyards (pdf of article)
• The Effects of Reserve Component Mobilization on Employers (pdf of article)
• Does DoD Profit Policy Sufficiently Motivate Defense Contractors? (pdf of article)
• Auctions in Military Compensation (pdf of article)

 Issue Overview

Defense resource issues appear in many guises and often do not come with an identifying label. Nevertheless, they can be loosely grouped into three bins:

• Specific investment decisions,
• Policies affecting a class of resource decisions, and
• Assignment of organizational responsibilities for resource decisions and design of decision-making processes.

Through the years, IDA has worked extensively on issues in each of these categories, as is illustrated in the articles in this issue of Research Notes.
 
The first article, covering our analysis of the alternate engine program for the Joint Strike Fighter, is a good example of an analysis of a specific investment decision. The question was whether the government should procure engines for the JSF from two sources, Pratt & Whitney and General Electric-Rolls Royce. The engines would be physically and functionally interchangeable. There clearly are costs to pursuing two engine programs (e.g., the costs of developing the alternate engine). There also clearly are benefits to dual sourcing (e.g., the potential for lower prices through competition). The issue is whether the value of the benefits exceeds the costs. IDA’s study provided a sound basis for a decision by quantifying most of the benefits and costs, and describing the major considerations involved in the few instances in which the value of the benefit or cost could not be quantified.
 
Three articles in this issue describe studies that focus on the need for changing acquisition policies. The question behind the profit policy analysis, for example, is whether the returns that existing profit policy provided to defense contractors is sufficient to retain them in the defense industry. Our study of the shipyard industrial base and the costs to employers of the Uniformed Services Employment and Reemployment Rights Act are, similarly, concerned with determining some of the consequences of particular policies.
 
The final article in this issue is an example of an analysis of mechanisms used to make resource decisions. The decisions in this case involve the sizes of retention bonuses offered by the Services for various occupational specialties. Currently, retention bonuses are set by the Services and then adjusted as it becomes known whether changes are required to yield the number of retentions sought. The article argues that a form of an auction mechanism, along the lines of that already being used by the Navy in making assignments, would be better for both the Services and the military members.

Each of the analyses in this issue is unique, driven more by the facts of the particular topic than any methodological guidelines. That said, resource analyses tend to have two features in common: costs, and often cost estimation, as clearly was the case for the analysis of the JSF alternate engine program; and analysis of related resource issues, which usually entails examining how key actors respond to various incentives. The relevant “actors” can be individuals, as is the case in the analysis of TRICARE costs, or firms, as in the shipyard industrial bases analysis. The “actor” might also be a government organization. Although none of the six studies highlighted in this issue presents a good example of such, many IDA efforts over the years have addressed issues related to processes and organizational behavior that affect resource allocation decisions by the government.

Sound resource analyses draw not only on disciplinary backgrounds such as economics, operations research, and finance, they also draw on several DoD communities of practice—acquisition, cost estimation, controllership, test and evaluation. Individual studies may also require people familiar with particular technologies, areas of policy, or DoD organizations or programs. To ensure that the necessary expertise is brought to bear on the problem, IDA conducts resource analyses using teams drawn from across all our research divisions.