Impact of Continuous Competition on Operations and Support Costs

Abstract

One of the challenges to any DoD budget analyst is determining the net cost of defense systems. This is not a simple task. To the casual observer who follows press announcements of new defense systems, the overriding factor is procurement cost. Indeed, these costs are the most straightforward: $5 to $7 billion for a Nimitz class aircraft carrier, $1 billion for an Arleigh Burke guided missile destroyer, and so on. These costs may seem large, but they shrink in comparison to the costs of owning, operating, maintaining, and supporting these ships. Over its 50-year lifetime, the Nimitz class aircraft carriers operations and support (O&S) costs are nearly $30 billion. For major defense systems, like ships, aircraft, and tanks, the O&S costs account for 65% to 70% of total life-cycle costs, which refers to the total amount spent on a defense system for planning, R&D, testing, production, O&S, and disposal. O&S costs may be large, but they are frequently not a driving factor in the design of new defense systems. By not making critical O&S cost-reducing decisions in the design stage of the acquisitions process, the total costs of defense systems become unsustainable for the nation.