The Economics of Multiyear Contracting
CENTER FOR NAVAL ANALYSES ALEXANDRIA VA MARINE CORPS OPERATIONS ANALYSIS GROUP
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The current plan for multiyear contracting is supposed to capture the benefits of multiyear procedures while avoiding the pitfalls of the past by carefully selecting programs that are to be multiyear funded. DoD has a list of criteria for the selection of programs for multiyear contracting. Five of the six criteria deal with the inherent predictability of the program, but the first one restricts multiyear to programs that yield substantial cost avoidance or other benefits when compared to annual contracting methods. Because of the risks inherent in multiyear contracts, the government does not want to use multiyear procedures unless the expected benefits are very high. This paper analyzes the effects of legislative changes sought by DoD on the price of weapons systems. Budgeting and funding practices are also discussed because these practices play an important role in choosing the best type of contract.
- Economics and Cost Analysis
- Government and Political Science
- Logistics, Military Facilities and Supplies