Accession Number : ADP002770

Title :   Analysis of Incentives for Productivity-Enhancing Investment,


Personal Author(s) : Gottschalk,G. ; Myers,M. G. ; Konvalinka,M. J.

Report Date : 1983

Pagination or Media Count : 5

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)

Descriptors :   *Government procurement, *Incentive contracts, *Contract administration, *Management planning and control, Productivity, Production rate, Accounting, Costs, Standards, Requirements, Interactions, Industries, United States Government, Cost estimates, Strategy, Policies, Symposia

Distribution Statement : APPROVED FOR PUBLIC RELEASE