Can Profit Policy and Contract Incentives Improve Defense Contract Outcomes?

Abstract

This paper examines the use of profit and contract finance policies as tools to motivate defense contractors to deliver systems that perform as required, on time, and within budget. It explores three areas where contract outcomes appear to be linked to these policies: the weighted guidelines; incentive contract features; and major sole-source procurement programs. With the weighted guidelines--provisions in the Defense Federal Acquisition Regulation Supplement (DFARS) for determining the base fee specified in a typical DoD acquisition contract--the facilities capital mark-up and its effect on capital investment is examined. Also, the effect of contract incentives on cost growth is studied. Finally, the economic "prize" model inherent in major defense acquisitions is re-examined in the context of its incentive effect on system cost. The study conclusions suggest that the incentive tools examined cannot be expected to greatly improve the average performance, schedule, and cost outcomes for the Defense Department.

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Document Details

Document Type
Technical Report
Publication Date
Oct 01, 2008
Accession Number
ADA491740

Entities

People

  • David L. Mcnicol
  • Kenton G. Fasana
  • Scot A. Arnold

Organizations

  • Institute for Defense Analyses

Tags

Communities of Interest

  • Human Systems
  • Space
  • Weapons Technologies

DTIC Thesaurus Topics

  • Aircraft Industry
  • Aircrafts
  • Business Administration
  • Contractors
  • Contracts
  • Defense Industry
  • Department Of Defense
  • Economics
  • Fixed Price Contracts
  • Governments
  • Incentive Contracts
  • Management Personnel
  • Military Acquisition
  • Military Aircraft
  • National Security
  • Organizational Structure
  • Procurement

Readers

  • Government Contracting/Procurement.
  • Theoretical Analysis.