Balancing Switching Costs and Opportunity Costs:
Market-Based Architectures for Defense Acquisition
Motivating a New Approach: The crescending of “Software-
Defined Warfare” has re-ignited the debate on the
fundamental design trades needed to meet evolving mission
needs, including the value of “Owning the Technical Baseline”
(OTB) and a modular open systems approach (MOSA).
MOSA aims to accelerate the development and deployment of capabilities within
defense acquisition programs. This is accomplished by strategically decomposing
systems into critical functions, each with standardized interfaces and designed for
open communication with other modules. In theory, this modular approach reduces
complexity, leading to greater competition among capability providers and to shorter
upgrade cycles.
However, several challenges have limited the full realization of MOSA’s potential.
To fully capitalize on its benefits, significant upfront time and resource investment
is required to accurately define the system architecture. The magnitude of
this investment is primarily driven by overly prescriptive definitions of system
components, rigid enforcement of data standards, and the complexities of verifying
“openness” and interoperability across various system elements.
External factors are prompting a reassessment of MOSA principles, or at least a
reconsideration of the default assumptions and methodologies. The nature and set
of feasible solutions in the optimization between often competing attributes, like
speed and modularity, has fundamentally changed due to the rise of a venture-
backed commercial industrial base and availability of commercial and/or Non-
Developmental Items (NDI) with relevance to defense missions.
The rise of commercial and NDI, coupled with the accelerated pace of change in
available solutions (supply) and emerging challenges (demand), motivates a new
approach for market-based architectures and design considerations.
This approach aims to build upon the principles of OTB and MOSA while
accounting for shifts in the distribution of technology sourcing and refresh rates.
An optimized approach will enable broader competition, accessibility to dynamic
responses to evolving demands, and ensure users have access to the best possible
capabilities now and in the future.
Solutions require a shift from traditional metrics of Cost, Single-Pass Schedule,
and Performance to include Switching Costs and Opportunity Costs for continuously
evolving system solutions. Switching Costs represent the impacts across all funding,
Key Questions
How can DoD leverage
market-based
architectures to address
the accelerating
pace of technological
innovation and evolving
mission complexity with
immediate capability
and continuous tech
refresh?
What architectural
principles are
necessary to
ensure adaptability,
interoperability, and
mission effectiveness
in defense systems?
How can DoD foster
collaboration with
industry and leverage
competition to drive
innovation while
safeguarding mission-
critical commercial
capabilities?
