A Method for Analyzing Competitive, Dual Source Production Programs

Abstract : During the past several years, program managers and cost analysts within the Department of Defense have been asked frequently to consider the cost effectiveness of dual source, competitive procurement strategies. The most common solution to this problem, which we will call the traditional approach, requires difficult assumptions about the behavior of the second source during the competitive program. This paper will present an alternate approach which avoids these difficult assumptions concerning the second source. This alternative approach has been used by the Office of the Secretary of Defense (OSD) Cost Analysis Improvement Group (CAIG) for independent studies of dual sourcing. This paper will describe the rationale for the Break-even approach and the method for implementing it. The break-even approach develops a structure for deciding if competition is likely to be successful or not without estimating the cost of productivity, by the second competitor.