ON THE CHOICE OF MULTI-TASK R&D DEFENSE PROJECTS: A CASE STUDY OF The ISRAELI MISSILE DEFENSE SYSTEM

Abstract

Investments in R&D constitute a major share of the expenditures of the hi-tech industry since, generally, they enable firms to successfully compete in the rapidly and constantly changing markets for hi-tech products and services. The role of R&D projects is particularly important in the areas of defense and homeland security due to the nature of warfare and the continuous threats posed by arms races and by terror organizations. This study analyzes the choice of the R&D projects designed to counter multiple related military threats. It develops the methodology required to assess whether it is preferable to develop one project to thwart several related threats, or several distinct projects, each of which provides an answer to one specific threat or a partial set of the threats. An analytic solution is provided and assessed for two simple models with two related threats. A solution of the model is then provided for any number of related threats, using a dynamic programming methodology. Finally, we demonstrate the usefulness of our model and methodology to Israel’s missile defense problem; that is, we show how to optimally develop systems aimed at thwarting the multiple threats of short-, medium-, and long-range missiles.

Keywords:

• Defense R&D
• Multi-task projects
• Missile defense system

JEL classification:

• D74
• D78
• H41
• H56
• H57

Notes

¹This assumption, which sometimes may be a good approximation of reality, is made for simplicity. Later on we analyze exponential costs due to the increasing costs of R&D (see Tishler, 2008).

²Optimization and dynamic programming are described in Bellman (2003) and Bertsekas (1987). Dynamic programming has been employed in the defense literature by Daula and Moffitt (1995).

³The cost matrix can be computed prior to the optimization process for any potential project (resolving threats from i to j) and the desired performance levels. The cost of nonfeasible projects (e.g. those that cannot be performed due to technological constraints, say) is set to equal infinity.

⁴These computations employed Matlab 7.9.0 on a PC computer, Dual Core E6550 2.33 GHz processor, 2.00 GB Ram.

⁵All the data on the cost of the weapon systems that we describe in this section, on their ranges and on the areas that they are designed to defend are based on public information. Detailed descriptions of the systems’ capabilities and costs are available in the Appendix.

⁶See Ben-Ishay (2011), http://www.rafael.co.il, and http://www.iai.co.il.

⁷ http://www.raytheon.com/capabilities/products/phalanx/ (accessed 14 November 2011).

⁸ http://www.globalspec.com/reference/15637/121073/northrop-unveils-skyguard-laser-air-defense-system (accessed 14 November 2011).

⁹See O’Rourke (2012).

¹⁰ http://www.lockheedmartin.com/products/thaad/index.html (accessed 14 November 2011).

¹¹The required performance level of each solution depends on the damage that can be caused by the threat that the solution it is designed to thwart. We set P = 0.8 for countering Kassam, Katyusha, and Grad rockets; P = 0.85 for thwarting Zilzal rockets and P = 0.9 for thwarting ballistic missiles (Scud and Shihab); see details in Stav (2004) and Rubin (2008).

¹²See http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=defense&id=news/LASE07136.xml (accessed 23 December 2011).

¹³See http://www.armedforces-int.com/news/davids-sling-weapon-system-for-israeli-defence.html (accessed 23 December 2011).

¹⁴See Efrati (2011).

¹⁵See Efrati (2011). Arrow 2 is intended to intercept threats like the Scud. Arrow 3 is intended to intercept threats like the Shihab.

¹⁶See the appendix for a detailed description of the entries in Table III.

¹⁷Some of the differences between the solution in Table III and the solution chosen by the Israeli government are due to the maturity (or lack thereof) of various technologies, disagreements about the capabilities of various systems, and costs which, due to inaccessibility of data, were not accounted for in our model (see Aviram, 2010).

¹⁸The David’s Sling system has the potential to thwart short- and long-range threats. Note that the benchmark for comparison of solutions for short-range threats is a medium-size city, while the benchmark for comparison of solutions for long-range threats (Scuds, Shihabs) is ‘half of Israel’.

¹⁹ http://www.raytheon.com/capabilities/products/phalanx/ (accessed 14 November 2011).

²⁰ http://www.haaretz.com/print-edition/news/barak-purchases-u-s-system-to-intercept-gaza-rockets-1.274499 (accessed 14 April 2012).

²¹ http://defensetech.org/2010/07/21/israel-says-iron-dome-ready-idf-balks-at-price-tag/ (accessed 14 April 2012). http://www.reuters.com/article/2010/05/13/us-israel-usa-irondome-idUSTRE64C5JO20100513?type=politicsNews (accessed 5 May 2012).

²² http://in.reuters.com/article/2011/05/26/idINIndia-57287720110526 (accessed 14 April 2012).

²³ http://www.themarker.com/news/1.1574410?redir=1&snopcmdt=1 (accessed 14 April 2012).

²⁴It may also be developed to counter intercontinental ballistic missiles and other advanced threats, by providing laser interception from an airplane (airborne-laser) or satellites (space-based-laser). It should be noted that the Pentagon has announced that it will no longer develop this system to defend against long-range ballistic missiles,

http://www.aviationweek.com/Article.aspx?id=/article-xml/asd_12_21_2011_p01-02-408678.xml (accessed 26 April 2012).

²⁵ http://www.globalspec.com/reference/15637/121073/northrop-unveils-skyguard-laser-air-defense-systeml (accessed 26 April 2012); http://www.globes.co.il/serveen/globes/docview.asp?did=1000052055 (accessed 15 April 2012).

²⁶See http://www.armedforces-int.com/news/davids-sling-weapon-system-for-israeli-defence.html (accessed 23 December 2011).

²⁷Based on the information that each canister can support 16 interceptors and the assumption that the DS is aimed to thwart long range rockets which are less abundant than short range rockets but more abundant than Ballistic missiles.

²⁸See http://www.defence.pk/forums/military-forum/13322-u-s-israel-develop-davids-sling-missile-defense.html (accessed 25 April 2012).

²⁹See http://www.israelnationalnews.com/News/News.aspx/152071#.T9NmVVJTYTA; http://www.israelnationalnews.com/News/News.aspx/146160#.T9NmpFJTYTA; http://www.army-technology.com/projects/arrow2 (accessed 8 June 2012).

³⁰ http://www.missilethreat.com/missiledefensesystems/id.10,page.2/system_detail.asp (accessed 2 June 2012).

³¹ http://www.haaretz.com/misc/article-print-page/an-arrow-to-the-heart-1.28321?trailingPath=2.169%2C (accessed 29 April 2012).

³²Assuming an evolution of Arrow 2 with additional development costs; http://www.ynetnews.com/articles/0,7340,L-3579000,00.html (accessed 29 April 2012).

³³See Efrati (2011). Arrow 2 is intended to intercept threats like the Scud missile. Arrow 3 is intended to intercept threats like the Shihab missile.

³⁴See O’Rourke (2012).

³⁵ http://www.lockheedmartin.com/products/thaad/index.html (accessed 14 November 2011).

³⁶ http://www.defenseindustrydaily.com/Land-Based-SM-3s-for-Israel-04986/ (accessed 26 April 2012).

³⁷Assuming procurement of six batteries for the USA and two for Israel; http://www.missiledefenseadvocacy.org/web/page/930/sectionid/557/pagelevel/3/interior.aspx (accessed 26 April 2012).

³⁸ http://www.army-technology.com/projects/thaad (accessed 29 April 2012).

³⁹ http://www.army-technology.com/projects/thaad (accessed 29 April 2012).