DOD's Industrial Modernization Incentive Program (IMIP)
Abstract
The Department of Defense's (DoD's) Industrial Modernization Incentive Program (IMIP) is designed to encourage increased contractor investment in efficient production equipment and processes as well as management and other software systems that will result in higher contractor productivity and reduced weapon system acquisition costs. Program objectives also include improving product quality, shortening lead time, reducing life cycle costs, and increasing surge and mobilization capabilities. The two primary incentives used are as follows: (1) payments based on cost reductions and avoidances, and (2) government investment protection guarantees if affected weapon programs are terminated prematurely. IMIP addresses two DOD acquisition conditions which are cited as inhibitors to contractor investments in modern plant equipment. These conditions are directly basing profit on costs incurred, and the instability of weapon system programs and the uncertainty of incremental annual buys of weapon systems. DoD officials believe contractors are reluctant to make investments in expensive equipment when profits may be reduced. Uncertainty that a reasonable return on investment can be generated if a weapon system's procurement is reduced or terminated also slows investments. In November 1982, the Deputy Secretary of Defense approved a test of the IMIP based on recommendations from DoD's Tri-Service Committee for Improving Industrial Productivity. The purpose of the test was to determine the appropriateness of various approaches to accomplish program objectives. The charter authorizing the test established a steering group composed of officials from the services, the Defense Logistics Agency, and the Office of the Secretary of Defense (OSD). The steering group was responsible for monitoring the conduct and results of the test program and evaluating the success of the various incentives and the overall program.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 1986
- Accession Number
- ADA496548
Entities
People
- Philip L. Cunningham
Organizations
- Defense Security Cooperation Agency