This report focuses on how competitive source selections can be used to better emphasize the government's goals related to reducing operating and support (O&S) costs. The U.S. Air Force has struggled with how to incorporate O&S costs into its source selection process because of attributes of O&S activities, regulatory requirements, and institutional factors that discourage their inclusion.

Inclusion of Operating and Support Costs in Competitive Air Force Source Selections

Challenges and Tools for Implementation

Frank Camm, Lauren A. Mayer, Elizabeth Hastings Roer, Gabriel Lesnick, Sheng Tao Li, Phillip Carter, Michael Boito, Tim Conley, Brian Dougherty

ResearchPublished May 5, 2025

Competitive source selections for weapon systems can be designed to reflect different goals of the U.S. government, including those related to system performance, acquisition schedule, and procurement and sustainment costs. This report focuses on how competitive source selections can be used to better emphasize the government's goals related to reducing operating and support (O&S) costs, focusing on the U.S. Air Force. Over the life cycle of major weapon systems, O&S costs tend to dominate. Agencies may have the greatest ability to improve those O&S costs during Engineering and Manufacturing Development (EMD) activities, when the system engineering design factors that drive O&S costs are being determined. This suggests, then, that O&S costs can be potentially important evaluation factors in weapon system EMD source selections. However, the Air Force has not been explicitly using O&S cost estimates in EMD source selection.

In this report, the authors explore why O&S costs have not appeared more often in Air Force EMD source selections and how the Air Force can conduct source selections that are better able to promote O&S improvements of new systems, driving these costs down. To develop these insights, the authors interviewed a broad range of stakeholders and reviewed a wide body of literature. They also performed a qualitative analysis of all GAO decisions for a decade's worth of protests against the Air Force. Finally, the authors applied economic theory to develop a systems-level view of the problem. This research was completed in 2018 and has not been subsequently revised.

Key Findings

Decisions during EMD can affect some O&S cost factors

  • For the average Air Force program, nearly 90 percent of O&S costs are associated with those related to unit-level manpower, unit operations, and maintenance.
  • Engineering design decisions made during EMD can affect some of the factors associated with O&S costs. Improving such factors would reduce costs associated with inputs to the three costliest O&S elements.
  • O&S cost estimates also include factors that are beyond the control of the Air Force, or potential contractors, at EMD. Future wages and fuel costs for O&S are uncontrollable and unknown.

Difficulties arise when using O&S costs in source selections

  • There are two categories of reasons why the Air Force avoids using O&S cost estimates as an evaluation factor in source selections: practical concerns and institutional features that discourage even an effort to consider including O&S costs.
  • If the Air Force chooses to include O&S costs in an EMD source selection, then the Air Force must articulate O&S cost evaluation factors in the request for proposals and evaluate these factors for their realism and reasonableness.
  • O&S cost control might lead to costly system design features.
  • O&S cost savings realized decades in the future cannot be factored into any trade-offs assessed between the acquisition goals of cost and system performance.
  • Limits on contract duration and long-term funding commitment restrict the ability of the Air Force to hold an offeror accountable for O&S performance claims made during EMD source selection.
  • If it factors in O&S costs, the Air Force faces an increased risk of an offeror filing a bid protest with the U.S. Government Accountability Office (GAO). A successful bid protest could lead to the Air Force having to recompete the contract, or cancel and reissue the solicitation, adding months or years to the timeline for production and delivery.

Recommendations

  • The Air Force should use a general framework to determine whether to include O&S costs in EMD source selections.
  • The Air Force should improve its sustainment cost databases in terms of historical sustainment data quality and availability.
  • The Air Force should make use of market research and other presolicitation activities.
  • Regardless of whether the Air Force includes O&S outcomes as cost or technical factors, it must use an approach that follows acquisition law. In practice, this means more closely aligning Air Force practice with GAO interpretations of federal acquisition law.

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Camm, Frank, Lauren A. Mayer, Elizabeth Hastings Roer, Gabriel Lesnick, Sheng Tao Li, Phillip Carter, Michael Boito, Tim Conley, and Brian Dougherty, Inclusion of Operating and Support Costs in Competitive Air Force Source Selections: Challenges and Tools for Implementation. Santa Monica, CA: RAND Corporation, 2025. https://www.rand.org/pubs/research_reports/RRA9-1.html.
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The research described in this report was sponsored by the the Office of Global Reach Programs (AQQ) in the Office of the Assistant Secretary of the Air Force for Acquisition (SAF/AQ) and conducted within the Resource Management program of RAND Project AIR FORCE.

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