Accession Number : ADP002796

Title :   Contractor 'Hungriness' and the Relative Profitability of DoD Business,

Corporate Author : NAVAL POSTGRADUATE SCHOOL MONTEREY CA

Personal Author(s) : Greer,W. R. , Jr ; Liao,S. S.

Report Date : 1983

Pagination or Media Count : 5

Abstract : Lately, DoD-contractor profitability has been very much an issue. Some feel low profits may convert defense business into a market of last resort. Others allege defense contractors earn excessive profits. We address the contradiction between these viewpoints. Specifically, we examine data covering 20 years, and study how the profitability of DoD contracts is influenced. We ask how profitable contractors re in their DoD versus commercial business segments, and whether the risk levels faced are equivalent. Our conclusions are that Program Managers (PM's) take advantage of the bargaining power they hold to buy goods at substantially lower profit margins when capacity utilization is low. The returns earned by contractors on DoD business are measurably lower than the returns on commercial business during periods of low capacity utilization. Also, the volatility of returns is higher for Dod business which means the risks are viewed by management as being somewhat higher. (Author)

Descriptors :   *Government procurement, *Contract administration, *Management planning and control, *Planning programming budgeting, Finance, Accounting, Allocations, Resource management, Strategy, Symposia

Distribution Statement : APPROVED FOR PUBLIC RELEASE