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

This CSIS report uses budgetary and program data to better understand the historical trends in the relationship of production costs to development costs in complex acquisition programs.

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 CSIS report 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.

I | Introduction ...................................................................................................................................................... 1

II | Declining Procurement-RDT&E Ratios: The Result of a Broken Acquisition System? ............. 4

III | Methodology and Study Design............................................................................................................. 7

Data Methodology .................................................................................................................................... 10

IV | Historical R&D Trends ............................................................................................................................. 10

Historical R&D Intensity Trends by Industry .................................................................................... 14

Defense R&D Trends ................................................................................................................................. 16

V | Ratio of Procurement to RDT&E Trends ........................................................................................... 18

Overall DoD Ratio of Procurement to RDT&E ................................................................................. 18

Ratio of Procurement to RDT&E by Component ............................................................................ 24

Ratio of Procurement to RDT&E by Platform Portfolio ............................................................... 44

Conclusion .......................................................................................................................................................... 57

Concluding Thoughts .............................................................................................................................. 61

About the Authors ............................................................................................................................................ 62