DOD PROCUREMENT: Multiyear and Annual Contract Costs

The effect on cost or price of using multiyear contracting instead of a series of annual contracts cannot be quantified because of a variety of factors. Among these factors are quantity changes, schedule changes, engineering or design differences, the differences in the competitive environment when the contracts were awarded, and cost reductions resulting from learning during earlier production. Our comparisons are not conclusive because price changes resulting from some of the factors listed above could also contribute to the price differences. Nevertheless, our comparisons disclosed that, in most cases, unit prices were lower for multiyear contracts than for prior annual contracts.