Is the Ratio of Investment between Research and Development to Production in Major Defense Acquisition Programs Experiencing Fundamental Change?

With the advent of the information age, both commercial industry and the Department of Defense are moving towards complex R&D-intensive systems over the simpler, mass-produced systems of the industrial age. This paper analyzes the historical trends in the relationship of production costs to development costs in complex acquisition programs. To understand this phenomenon, the study team examines it at two different levels. The first is the macro investment level where portfolio management trade-offs are made between aggregate development and procurement and between programs. The second level is individual programs where the ambitions of the program and the underlying technology shape the resources required for a program to complete development.

This material is based upon work supported by the Naval Postgraduate School Acquisition Research Program under Grant No. N00244-17-1-0017. The views expressed in written materials or publications, and/or made by speakers, moderators, and presenters, do not necessarily reflect the official policies of the Naval Postgraduate School nor does mention of trade names, commercial practices, or organizations imply endorsement by the U.S. Government.

Gregory Sanders
Deputy Director and Fellow, Defense-Industrial Initiatives Group

Andrew Philip Hunter

Rhys McCormick