Market Forces and the Defense Acquisition Marketplace

Abstract

Market forces exist in the defense acquisition marketplace as they do in any functioning market. The form of those forces is not necessarily identical to what is found in an open commercial market. The U.S. Department of Defense is not out to make a profit, and those who pay for defense are not consumers. All citizens are beneficiaries of a successful defense organization whether they pay taxes or not. However, companies that provide products and services for defense are participants in the defense acquisition marketplace. Understanding what market forces impact the buyer and the sellers is important to using those forces to improve buying power. Market forces work within the constraints of the marketplace design. That design may evolve from local practices and informal rules or from more formal rules, regulations, and enforcement mechanics. The defense marketplace design is dictated by public law, regulation, military directives, and acquisition practice. It is unlikely that the acquisition marketplace design will change very quickly, even in the face of current and potential budget cuts. On the other hand, acquisition practice that takes advantage of market forces present in the acquisition marketplace that work well within the marketplace design can be quickly implemented. This paper discusses the design and the market forces associated with defense acquisition and attempts to point out practices to use those market forces to improve the value proposition in defense acquisition for all parties. Better buying power is not just about spending less; it is about spending less for better quality, quantity, and capability by eliminating non-value added work and using market forces to get to should-cost prices.