NCJ Number
66557
Journal
MBA Volume: 12 Dated: (JUNE/JULY 1978) Pages: 46-50
Date Published
1978
Length
5 pages
Annotation
A PATTERN FOR ASSIGNMENT OF FEDERAL DEFENSE CONTRACTS WITHIN THE AEROSPACE INDUSTRY IS DESCRIBED, AND ALTERNATIVES FOR IMPROVING COST-EFFECTIVENESS ARE DISCUSSED.
Abstract
ALTHOUGH THE OFFICIAL POLICY FOR WEAPONS SYSTEM PROCUREMENT INDICATES THAT THE TYPES OF SYSTEMS DESIRED AND LET OUT FOR BID ARE SELECTED FOR THEIR STRATEGIC MILITARY VALUE AND ARE ASSIGNED TO THE CONTRACTOR WITH THE MOST COST-EFFECTIVE DESIGN, AN EXAMINATION OF PROCUREMENT PATTERNS INDICATES OTHERWISE. EVIDENCE SHOWS A 'FOLLOW-ON IMPERATIVE' IN BOTH THE SELECTION OF WEAPONS SYSTEMS BY THE DEFENSE DEPARTMENT AND THE ASSIGNMENT OF CONTRACTS. THE 'IMPERATIVE' DICTATES THAT IF ONE OF NINE MAJOR AEROSPACE PRODUCTION LINES IS OPENING UP, IT WILL RECEIVE A NEW MAJOR CONTRACT FROM A MILITARY SERVICE EVEN IF ITS BID FOR THAT CONTRACT IS LESS TECHNICALLY IMPRESSIVE OR COST-EFFECTIVE THAN THAT OF A COMPETITOR; AND ORDINARILY, THE NEW CONTRACT WILL BE STRUCTURALLY SIMILAR TO THE OLD (A 'FOLLOW-ON' CONTRACT). THIS STRATEGY SERVES THE POLITICAL AND ECONOMIC ENDS OF MAINTAINING FINANCIAL AND EMPLOYMENT STABILITY IN THE COMPANIES TRADITIONALLY INVOLVED IN AEROSPACE DEFENSE WORK. THE RESULT OF THIS PRACTICAL POLICY, HOWEVER, IS TO NARROW OPTIONS ON THE SELECTION OF DEFENSE SYSTEMS TO VARIATIONS OF SYSTEMS FOR WHICH PRODUCTION LINES ALREADY EXIST, WHILE GIVING LESS THAN TOP PRIORITY TO COST-EFFECTIVE DESIGN. SOME REASONABLE ALTERNATIVES TO THE EXISTING PROCUREMENT PATTERN WOULD BE THE COLLAPSING OF PRODUCTION LINES FROM 9 OR 10 TO ABOUT 6 OF THE HEALTHIEST. THIS WOULD MAKE IT EASIER TO AVOID MASSIVE DISRUPTION OF A REGION WHEN A MAJOR CONTRACT IS PHASED OUT, TO REALLOCATE FUNDS AMONG PRODUCTION LINES BY MORE INCREMENTAL AND GRADUAL MEANS, AND TO ADJUST THE OVERALL PROCESS OF DEFENSE PRODUCTION. ANOTHER ALTERNATIVE WOULD BE TO CONSTRICT PRODUCTION LINES FROM $1 BILLION OR MORE EACH IN ANNUAL WEAPONS SALES TO A SMALLER AMOUNT, PERHAPS BY SHARING A MAJOR WEAPONS SYSTEM BETWEEN PRODUCTION LINES, SUCH THAT THE SURVIVAL OF A COMPANY DOES NOT DEPEND UPON A SINGLE PRODUCTION LINE.