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Defense Industry Consolidation and Weapon Systems Cost Growth

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Master's thesis

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This thesis is a survey of the cost growth of weapon systems acquisition by the U.S. Department of Defense DoD. It attempts to assess whether the extensive consolidation of the defense industry has led to any significant reduction of cost growth. The primary data sources for the cost of weapon systems are the Selected Acquisition Reports SAR, which are published by DoD for the major acquisition programs. After an introductory section, Part 2 of the thesis provides background information and a literature review of U.S. defense industry consolidation. Part 3 examines several merger waves in the history of U.S. industry First Merger Wave 1897-1904, Second Merger Wave 1916-1929, Third Merger Wave 1965-1969, Fourth Merger Wave 1984-1989, and the Fifth Merger Wave 1992-2000. Part 4 examines relevant legislation and antitrust issues, including the Basic Elements of the Antitrust Legal Framework, the Sherman Act 1890, the Clayton Act-Federal Trade Commission Act 1914, the Hart-Scott-Rodino Act, Horizontal Merger Guidelines, and the Herfindahl-Hirschman Index HHI. Part 4 also looks at the role of the DoD in the consolidation of the defense industry. Part 5 focuses on the top five U.S. defense industry contractors The Boeing Company, Lockheed Martin, Northrop Grumman, General Dynamics, and Raytheon. Part 6 describes the methodology of the study, including assumptions and guidelines, cost growth calculations, and data analysis. Part 7 presents the results of the statistical analysis. And Part 8 presents conclusions and recommendations. An overall assessment is made of the current U.S. defense industry to determine if consolidation has improved efficiency and lowered costs, or if further restructuring of the acquisition system is necessary.

Subject Categories:

  • Economics and Cost Analysis
  • Military Forces and Organizations
  • Logistics, Military Facilities and Supplies

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