Affordability Aspects in the Development of Defence Equipment: Case Studies of Concept Generation in the Defence Industry

Daniel Amann, Ingrid Kihlander and Mats Magnusson

Defence and Peace Economics, 2021, vol. 32, issue 7, 847-863

Abstract: Cost escalation for many complex defence equipment is arguably not sustainable. Customer driven requirements have led to an exponential increase in costs by pushing frontiers of technology to support primarily incremental improvements of traditional equipment concepts. Accordingly, affordability has become a more discussed subject in defence acquisition. This paper addresses the process of generating complex defence equipment concepts. The purpose is to explore how affordability is managed in that process and to identify possible leads to how an unsustainable cost escalation for this type of equipment can be curbed. This is done by studying two cases of concept generation of future combat air equipment systems from a company process perspective. This applied micro perspective on cost escalation showed that none of the concepts generated in these two cases were assessed to curb the cost escalation. Further, the innovation model for the generated concepts, with only one notable exception, was incremental. Nevertheless, the empirical observations from these two cases offer leads on how to potentially foster a more innovative and affordability-oriented concept generation process for future defence equipment, as well as indicating avenues for future research.

Date: 2021
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DOI: 10.1080/10242694.2020.1733896

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