F-22A Multi-Year Procurement Program: An Assessment of Cost Savings: Summary

Buying defense weapon systems under multi-year contracts rather than a series of single-year contracts can save costs because contractors can buy materials in more economic quantities, schedule workers and facilities more efficiently, and reduce the burden of preparing multiple proposals. The U.S. A...

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Bibliographic Details
Published in:Policy File 2007
Main Authors: Younossi, Obaid, Arena, Mark V, Brancato, Kevin, Graser, John C, Goldsmith, Benjamin W, Lorell, Mark A, Timson, Fred, Sollinger, Jerry M
Format: Report
Language:English
Subjects:
Budgets/Expenditures
RAND Corporation
Online Access:Request full text
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Summary:Buying defense weapon systems under multi-year contracts rather than a series of single-year contracts can save costs because contractors can buy materials in more economic quantities, schedule workers and facilities more efficiently, and reduce the burden of preparing multiple proposals. The U.S. Air Force is in the process of awarding multi-year contracts for 60 F-22A aircraft over three years. Congress wants to assure itself that the proposed contract will yield the promised savings and asked RAND for an independent review of the estimated savings. Researchers found that a multi-year procurement of three lots of F-22A fighters would save an estimated $411 million--about 4.5 percent of the total contract value. They were able to trace 70 percent of the $411 million to substantiated savings estimates identified by the contractors. Examining the issue of multi-year savings using several approaches produces a consistent range of results, indicating that the savings attributed to the multi-year contract by the contractors appear to be reasonable.