Accession Number : AD0648136

Title :   ON THE SEPARATION OF PRODUCTION FROM THE DEVELOPER,

Corporate Author : RAND CORP SANTA MONICA CALIF

Personal Author(s) : Arditti,Fred D.

Report Date : FEB 1967

Pagination or Media Count : 17

Abstract : The paper presents a model which points toward the correct way in which the cost of separation should be measured. The model is applied to the two cases of co-production which occurred in the aircraft industry -- the F-84F and the B-47E. The added cost that the customer incurred from separation was calculated to be 6.6 percent above the cost that would have been incurred if separation had been avoided. A similar calculation yielded 7.0 percent for the case of the B-47E. If these extra cost estimates are representative, then the costs of separation appear to be substantial. This statement is further reinforced if one adds to the above cost figures the production licensing fees charged by the developer. On the other hand, it is pointed out that the threat of separation made credible by the undertaking of a few such cases by the government may make the aircraft industry more competitive. Certainly there are cost benefits to be derived by the government from fostering such competition. Whether or not these benefits offset the added cost of separation remains to be shown. (Author)

Descriptors :   (*PROCUREMENT, COSTS), (*WEAPON SYSTEMS, PROCUREMENT), (*INDUSTRIAL PRODUCTION, WEAPON SYSTEMS), AIRCRAFT INDUSTRY, GOVERNMENT PROCUREMENT, DEFENSE SYSTEMS, MATHEMATICAL MODELS

Subject Categories : Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE