Price Competition in Weapons Production: A Framework to Analyze its Cost-Effectiveness
Abstract
The staggering costs of modern weapon systems have spurred the search for more economical methods of weapon procurements. many defense establishment critics have touted increased reliance on competitive bidding and dual-source production as methods to reduce costs. Lieutenant Colonel Hampton's study addresses this important subject. He proposes a discounted cash flow investment model as the appropriate framework for analyzing the cost-effectiveness of developing a second source during the production phase of a major weapon system acquisition. He outlines the factors and impacts that must be considered in second-source analysis and reviews six DOD program specific analysis to determine if all factors and impacts were considered. Finally, he proposes a discounted cash flow investment model for second-source production analyses to help in deciding the probability that government investment in nonrecurring cost will be recovered. It is believed the author's findings are important in our continuing attempts to rationalize weapon systems procurements. Although everyone may not agree with his proposals, Colonel Hampton's study provides a significant challenge to those who have approached the subject in a less thorough and systematic manner.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jun 01, 1984
- Accession Number
- ADA215913
Entities
People
- Richard J. Hampton
Organizations
- Air University