Analysis of Incentives for Productivity-Enhancing Investment,
Abstract
There is evidence that Government contractors perform production contracts using high-cost methods leading to higher than necessary prices to the Government. Capital investments which lower total cost of performance are discouraged or at least not encouraged by current policies and market environment. This paper describes a model of contractor investment behavior within existing DoD contracting principles. A preference for investments which confer low rates of productivity gain is shown to exist under current contracting policies. A discounted cash flow investment analysis model is used to explore a number of correctives to current policies including increased weight on facilities capital employed in Department of Defense (DoD) profit policy, sharing of cost savings, and investment incentives such as accelerated depreciation. Finally, the payoff to the Government and DoD if each corrective were adopted is explored. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 1983
- Accession Number
- ADP002770
Entities
People
- G. Gottschalk
- M. G. Myers
- M. J. Konvalinka
Organizations
- LMI