Can Roper break the link between R&D and production? The case of NGAD

“NGAD could take the form of a single aircraft and/or a number of complementary systems – manned, unmanned, optionally manned, cyber, electronic forms that would not resemble the traditional ‘fighter’. For example, a larger aircraft the size of a B-21 may not maneuver like a fighter,” the CRS report explains.

 

“But that large an aircraft carrying a directed energy weapon, with multiple engines making substantial electrical power for that weapon, could ensure that no enemy flies in a large amount of airspace. That is air dominance. There appears little reason to assume that NGAD is going to yield a plane the size that one person sits in, and that goes out and dogfights kinetically, trying to outturn another plane – or that sensors and weapons have to be on the same aircraft.”

That was an excerpt from a CRS report, quoted in the article “US lifts lid on Next Gen Air Dominance fighter.” Notice that this talk recognizes the inherent uncertainty about what is the best technical design and concept of operations. This is a critical starting point for thinking about industry’s incentives. Here’s a bit more:

Supporting Dr Roper’s push for the Digital Century Series, the CRS report states: “Ultimately, that vision could result in firms specializing in design that pass their designs to high-tech manufacturing centres capable of producing anything sent to them in digital form, rather than maintaining dedicated airplane factories. Companies with global logistics chains could be tasked with the sustainment mission.”

I’d just like to mention that for the first time in more than 60 years, there is a serious discussion about breaking the link between development and production. (While there have been discussions about getting technical data packages in order to compete out production, that discussion is somewhat different than getting companies involved in development and pay them a good return for development without the intention to raking in the profits in production and sustainment). Here’s the great Armen Alchian in his 1954 paper… First on the relationship of development and production:

This suggests that the “losses” incurred in development are in effect “loss leaders” or devices whose cost is more than recouped in other activity, in this particular case production. The foregoing implies that we should find a state of hyper-competition in the development field and a corresponding state of hypo-competition in production.

And now on separating R&D and production. Alchian’s real goal here was understanding that uncertainty is too great at the start of development to clearly predict what the right specifications will be and whether a system is worthy of going into the inventory.

Along these lines, it seems worthwhile breaking the link between development and procurement. Procurement contracts should and could be awarded not for successful development work but for efficiency in production. Therefore there should be no necessary relationship between the developer and producer. Such a measure would force the aircraft companies to consider development as an end in itself and bring about lower costs of production simply as a result of the direct competition for production contracts.

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