The Net Impact of 'Other Variables' on Negotiated Profit for Department of Defense Contracts
AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH SCHOOL OF SYSTEMS AND LOGISTICS
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The objective of this thesis is to determine if profits negotiated on DOD contracts are a direct result of the Weighted Guidelines Profit Analysis Method, or if Other Variables has a net impact. A model is proposed for the defense profit process consisting of six steps from policy formulation to the effect of defense profit policy on the defense industrial base. The thesis then focuses on the portion of the model which describes the step from weighted guidelines and negotiated profit 1 The Actual Process which includes the Other Variables and 2 the Theoretical Process which does not. Results are measured using the profit Z score which represents the number of standard deviations that separate negotiated profit from the mean of the distribution of all possible profits. The Theoretical Process assumed that weighted guidelines profit factor values are applied to negotiated costs. Using the DFAR definition of normal profit factor values, the average of all individual contract profit Z scores should equal zero. The Actual Process is represented by FY 89 negotiated profits and is assumed to include all factors which impact these profits. The Actual Process is measured using the average of all Z scores calculated from individual FY89 contracts. Keywords Theses Departmentdefense Weighting functions Economic analysis Contractsprofitsnegotiations.
- Economics and Cost Analysis