Best Practice in Technology Acquisition: Early Licensing of Technology before or during Prove-Out Phase
Abstract
Best Practices in procurement within the Defense industry include various strategic procedures to ensure supplies that are adequate to meet demand. For example, in the context of commodities, such strategies historically included bulk purchasing and warehousing of supplies. In contrast, an example of a more recent strategic practice is supply-chain management; this method includes just-in-time production, which is often appropriate for the procurement of complex systems such as aircraft and other vehicles. Yet, neither of these strategies is necessarily appropriate for new technologies that must be mass produced, such as body armor. First, successful implementation of bulk purchasing and warehousing requires goods which have a long design-life and results in increased warehousing costs and the potential stockpiling of out-dated commodities. Second, just-in-time production depends on stable demand and does not address large fluctuations in demand (e.g., a steep ramp-up). Therefore, another strategy is necessary to deliver supplies of such goods adequate to meet demand with neither incurring excessive costs in warehousing nor excessive delays in delivery. To facilitate such technology acquisition, the author proposes that the prove-out phase should be conducted under a licensing agreement that requires the supplier to license to the Department of Defense (DoD), or its suppliers, the right to manufacturer the technology at a predetermined royalty rate on sales -- from 3% to 10% -- depending on the particular technology. This paper explores the advantages of using early licensing in the acquisition of body armor. By using this approach, the DoD can shorten the technology acquisition process and can utilize multiple suppliers of a technology to ensure continuity in its supply chains in the event that one vendor cannot meet DoD requirements. A similar approach could be used for acquisitions of proven technologies as well.
Document Details
- Document Type
- Technical Report
- Publication Date
- May 01, 2005
- Accession Number
- ADA498379
Entities
People
- Kenyon D. Potter
Organizations
- University of California