Showing papers on "Procurement published in 1977"

Incentive Contracting for National Defense: A Problem of Optimal Risk Sharing

Abstract: This paper analyzes risk sharing in defense contracting within an insurance framework with moral hazard present. The positive model specifies conditions under which risk sharing between the firm and the government can be expected to occur, and identifies the important exogenous characteristics of the firm that determine the equilibrium set of contract terms. An important public policy implication is derived from a normative comparison between the simple incentive structure currently used in defense contracting and a modified contingent claims arrangement. The latter is shown to be superior in providing desirable risk sharing, while also maintaining appropriate marginal incentives for cost control. 1. Introduction * Contracting for national defense has accounted for over half of the total annual defense budget since the early 1960s. The goods supplied by private industry to satisfy the public demand for national defense are generally characterized by an advanced technology fraught with uncertainty, prone to rapid obsolescence, and having extremely large capital requirements. Furthermore, the demand for these goods fluctuates markedly, and is determined by a single buyer, the federal government. These characteristics tend to preclude the development of traditionally conceived markets, and have given rise to an alternative-the bilateral procurement contract. This contractual arrangement stipulates the terms of exchange between the government and a private firm, and also serves as a mechanism for risk sharing between the two parties. The procurement of major weapons systems and their component parts takes place almost exclusively through bilaterally negotiated contracts, rather than through a competitive bidding mechanism (which is generally used only for the procurement of ready-made items). Furthermore, the competition that does exist between firms vying for major defense contracts is principally along the lines of technical design, with true cost considerations playing a relatively minor role in contract awards. The lack of significant price competition creates a strong potential for monopoly profits to be earned in

Management of Construction Equipment

Abstract: Part 1 Objectives, policies and strategies: equipment policy and rental of equipment organization of hire companies and departments. Part 2 Investment and procurement: economic comparisons of plant alternatives plant alternatives plant profitability plant aquisition systematic selection of equipment calculating a hire rate. Part 3 Operational management: maintenance of equipment health and safety at work - regulations and requirements insurance and licensing legalities. Part 4 Financial and budgetary control: budgetary control and costing cash flow financial management computers and plant management overseas operations.

Computerized Production Process Planning.

Abstract: : A computerized production process planning system was demonstrated. The system performs generative process planning for machined cylindrical parts. Manufacturer-independence is achieved by using process decision models that express local manufacturing practice. A man-machine communications interface permits human oversight/modification of process plan development. Industry surveys were conducted to collect data relevant to the benefits of computerized process planning. Results of the surveys are summarized. Cash flow analyses estimating cost savings to industry are presented. Benefits of the demonstration system in defense procurement are projected. (Author)

Modern materials management

Abstract: An up-to-date and comprehensive guide to the latest concepts and techniques for successfully managing the flow of materials and products to, within and from the organization. It provides the expertise needed to manage input materials. It is a complete, practical guide to modern materials management and a thorough, easy-to-use reference that will prove an indispensable tool for any organization needing to reevaluate its system of materials management. Included in the Contents: Introduction, Production and Operations, Forecasting and Market Analysis, Purchasing and Procurement, Physical Supply, Inventory Control Systems, Inventory Valuation, Materials Handling, Transportation and Physical Distribution, Bibliography.

New Product Planning Decisions Under Uncertainty

Abstract: New product decisions often must be made with considerable uncertainty relating to sales, product and process development outcomes, manufacturing costs, etc. Purchasing commitments long and short-term and product and process development decisions are required at early points in the product life-cycle and usually involve large expenditures. The authors describe how Management Science techniques have been used to assist in new product purchasing and development decision-making, where the new product required significant technological innovation and was being introduced into a market in which there was little previous experience. The project approach consisted of: 1 formulating deterministic economic and capacity models to simulate the consequences of alternative outcomes in the market and technical areas; 2 working closely with engineering, procurement, marketing and planning organizations to determine the range and likelihood of the input variables; 3 using the models to determine the sensitive variables and to place probabilistic ranges on the outcomes of interest; and 4 presenting the results to management so that decisions could be made relative to plant construction, purchase quantities, and alternative components/processes. Emphasis is placed on methodology and the way management scientists can effectively work with and assist decision-makers, rather than on the models and techniques employed.

Managerial Planning in Procurement

Abstract: Managerial Planning in Procurement "Procurement planning--systematically obtaining materials at the lowest delivered cost--is what we do every day. Institutionalizing some formal process is no more than make work." "Procurement planning stands at the heart of our purchasing operation; without it all of our efforts would be opportunistic, and we almost certainly would overlook important opportunities to contribute to company profitability. These contrasting views focus on the question of whether purchasing is susceptible to the same rigorous management planning and control that characterize most other functional operations. The jury may still be out, but there is plenty of evidence that many purchasing organizations have already transcended the role of passive order taker. They are not only buying more effectively, they are gaining increased respect and recognition from top management by instituting active procurement planning programs. The intent of such programs is to realize the lowest overall delivered cost on purchased materials consistent with service requirements, while making efficient use of buyer resources. Procurement planning aims at striking a balance between operational requirements and potential cost reduction. It goes beyond the buy-as-usual approaches in several key ways. First, it calls for selection of profit-sensitive and critical commodities. Second, it requires that purchasing formulate specific annual cost and service objectives, submit them to management, and obtain agreement in a written plan. Third, the buying strategies needed to achieve these objectives are rigorously spelled out. In other words, procurement planning aims at developing comprehensive sourcing strategies (Figure 1). Too few purchasing departments have really adjusted to the uncertainty of today's purchasing environment. Although the disruptive conditions caused by shortage and recession in 1974 have given way to today's uncertain stability, many informed observers expect future conditions to fluctuate in a similar manner. Some of the factors likely to contribute to an uncertain market are: Continued supply vulnerability. The danger of another oil embargo aside, American industry relies heavily on imports of other critical materials, many of which come from one or two less developed countries and have shown sharp price increases(Table 1). At the same time, manufactured components are increasingly sourced worldwide, which complicates buying and lessens purchasing's assurance of on-time supply. Exaggerated lead times and soaring prices. Lead times for many key items are long and uncertain, while cost-push price increases continue regardless of demand. Although conditions have improved over two years ago, it is still difficult to develop a materials strategy in an environment where capital costs and currency exchange rates are highly unpredictable. Growing role of contractual procurement. More companies are recognizing that expenditures for contracts for material warrant closer attention. Evaluation of initial capital cost and subsequent service costs is complicated by the project magnitude that accompanies technological complexity (e.g., nuclear generating plant, $2.0 billion), extended completion dates caused by such factors as environmental restrictions, and a lack of history on which to base decisions. Yet, in many instances only cursory review has been accorded to the highly important but little understood procurement tradeoffs in this area of growing importance. Thus, if the 1970's can be described as the beginning of an age of both capital and material shortages, then cost-effective materials procurement will increasingly be a formidable challenge to companies having ambitious growth plans or experiencing pressure on their profit margins. In fact, most companies have already found purchasing's greater complexity much more difficult to manage than in the past. …

An Analytical View of Advance Incentivized Overhead Agreements in the Defense Industry.

Abstract: : Overhead costs constitute a substantial portion of the DOD dollars spent in the procurement of defense systems. Therefore, overhead control has become an area of special concern to government contract managers. Previous attempts to negotiate an advance agreement on total overhead costs have been unsuccessful due to a number of factors. This study examined those factors and another step in the evolution of advance agreement theory. This step involves the application of a sharing arrangement to underruns or overruns of the advance agreement target expenditure levels. In this study the authors outline the strengths and weaknesses of the current government overhead monitoring process, provide a basic structure for an advance incentivized overhead agreement and present the advantages and shortcomings of using such an agreement. The authors conclude that utilization of an advance incentivized overhead agreement will improve the current overhead monitoring process by establishing goal congruency between contractor profit and government cost goals and by facilitating the communication of government cost objectives to defense contractors.

Combat Vehicle System Operating and Support Costs: Guidelines for Analysis,

Abstract: : The Department of Defense has placed new emphasis on examining the projected operating and support (O/S) costs of planned weapons and finding ways to reduce those costs. O/S cost analyses are now a major part of the cost review conducted at each weapon procurement decision meeting by the Defense Systems Acquisition Review Council (DSARC) and the DSARC's principal advisor on new system costs -- the Cost Analysis improvement Group (CAIG). This report recommends guidelines for preparing and presenting estimates of the support investment (SI) and O/S costs of combat vehicle systems to DSARC. It provides a framework for objective comparison of SI and O/S costs of program, design, or support alternatives, using consistent methodologies and terminology. A general methodology for SI and O/S cost-estimating is described, a standard cost element structure is defined, and specific requirements for presentation of SI and O/S cost estimates to DSARC are proposed. Standards for the presentation and documentation of those cost estimates are also recommended.

Government Procurement Policy: A Survey of Strategies and Techniques.

Abstract: : This paper presents a discussion of United States military procurement policies from 1947 to present. Alternative contract types are discussed, with emphasis upon the allocation of risk between the contractor and the government. Strategies for the acquisition of major weapon systems are examined, and the impact of these strategies upon competition in the procurement process is considered. (Author)

Perimeter intrusion detection and assessment system

Abstract: To obtain an effective perimeter intrusion detection system requires careful sensor selection, procurement, and installation. The selection process involves a thorough understanding of the unique site features and how these features affect the performance of each type of sensor. It is necessary to develop procurement specifications to establish acceptable sensor performance limits. Careful explanation and inspection of critical installation dimensions is required during on-site construction. The implementation of these activities at a particular site is discussed.

An Application of Cost-Benefit Analysis to the USMC Program Objectives Memorandum (POM).

Abstract: : This report describes the work done in collaboration with the United States Marine Corps, on the development of a methodology to improve the 1979 Program Objectives Memorandum (POM) process. The generic approach chosen was cost-benefit analysis. The goal of cost-benefit analysis is to identify, for subsequent funding, those programs that optimize the total benefit to a decision maker within his budget constraints. The identification of optimal procurements is based upon determination of the 'true' costs and benefits of each program. 'True' or absolute costs and benefits are often very difficult to determine because subjective estimates must be made, and because some of the less-than-obvious costs and/or benefits may be overlooked. The programs involved in this analysis were all future capability items in the procurement appropriation. DDI's efforts were focused on obtaining good subjective estimates of the relative benefits for each of these programs. Psychologists and decision analysts have observed that the best way to obtain accurate quantifications of this sort is to use paried comparisons, that is, to ask the expert to make a series of choices between two packages of programs, each choice having certain implications about the benefits of the programs.

Committees ensure cost efficiency in purchasing.

Abstract: Purchasing committees are essential to effective materials procurement and management. These committees perform not only initial evaluation of materials and supplies but also ongoing reevaluation. Thus, they help to ensure that the hospital obtains and maintains appropriate quality, quantities, and cost effectiveness in its purchases and its inventory.

Ship operating and Support Costs: Guidelines for Analysis,

Abstract: : The Military Departments and defense contractors have for some time been actively concerned about rising life cycle costs (LCC) of Defense weapon systems. Over the past two years, the Department of Defense (DoD) has placed new emphasis on examining the projected operating and support (O and S) costs of planned weapons and finding ways to reduce those costs. O and S cost analyses are now a major part of the cost review conducted at each weapon procurement decision meeting by the Defense Systems Acquisition Review Council (DSARC) and the DSARC's principal advisor on new system costs--the Cost Analysis Improvement Group (CAIG). This report recommends guidelines for preparing estimates of the support investment (SI) and O and S costs of ship acquisition programs and presenting them to the DSARC. It provides a framework for objective comparison of SI and O and S costs of program, design, or support alternatives, using consistent methodologies and terminology. A general methodology for SI and O and S cost estimating is described, a standard cost element structure for ships is defined, and specific requirements for presentation of SI and O and S cost estimates to the DSARC are proposed. Standards for the presentation and documentation of these cost estimates are also recommended. These guidelines are intended to achieve consistent and effective preparation and documentation of SI and O and S cost estimates for major weapon systems, and to facilitate the DSARC's and the CAIG's examination of important SI and O and S cost issues.

Egyptian arms procurement in the post-1973 war era : a case study in the dynamics of the arms diversification process.

Abstract: : This thesis explores the post-1973 Middle East War arms procurement policy of Egypt. In embarking upon a policy of arms diversification shortly after that conflict, Egypt is seeking to end a 20-year period of exclusive reliance on the Soviet Union as a source of military hardware and training. Egypt is a unique case because she will face not only the wide array of problems common to any nation seeking to change the hardware and training base of its military forces from one source to another, but an additional set of problems stemming from the fact that she is one of the principal Arab confrontation states in the Middle East. This thesis addresses the decline in Soviet/Egyptian relations which led to the new arms procurement policy, the evolving status of Egypt's military capability, and the technical problems to be overcome in acquiring Western hardware and integrating that hardware into the Egyptian force structure. It finally addresses the political issues which will complicate the process of arms diversification. It concludes that in the absence of significant pressure for a new war in the Middle East, it will be possible for Egypt to rebuild its armed forces using Western equipment, at the exclusion of the Soviet Union. (Author)

An analysis of navy construction contract change order audits.

Abstract: : Paragraph 3-801 of the Armed Service Procurement Regulation requires that an advisory audit be performed for all one source negotiated procurement actions exceeding $100,000. This study examines the current usability of these advisory audits in the negotiation of Navy construction contract change orders. A survey was conducted to determine how audits are currently used and to solicit suggestions on how current procedures might be improved. Analysis of the response identified five recommendations for consideration by policy-making managers in the Navy construction contract administration organization. These five recommendations are (1) to recognize different group backgrounds and experience levels in the formulation of audit guidance; (2) to prepare a comprehensive informational reference; (3) to implement audit training and education; (4) to increase contractor awareness of informational responsibilities; and (5) to require direct communication between contract administrators and auditors. (Author)

Panel: The Merits Of Optical System End-Use Specifications Vs Detailed Parts Specifications

Abstract: The panel discusses the relative merits and problems of specifying an optical system by its ultimate end-use performance as opposed to the procurement of the system by detailed drawings of each of the piece-parts. The panel consisted of:© (1977) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.

Proceedings of NTEC/Industry Conference (10th): Resource Conservation through Simulation Held on 15-17 November 1977.

Abstract: : This report is a compilation of papers on a variety of technical and training subjects related to training device technology and training methodology. Representatives include sponsors, users, research, development, and procurement agencies and industry. The papers in this report were presented at the tenth NTEC/Industry Conference held 15 - 17 November 1977. The conference theme, 'Resource Conservation Through Simulation,' focuses attention on the multiple benefits that accrue through simulation. Simulation provides the technological base for training equipment. Through simulation, it is possible to bring that portion of the real tactical world into the classroom to support training needs. The classroom provides an effective and controlled environment for the individual and team learning experience. The utilization of training equipment results in substantial savings in resources. The tenth Conference is part of a continuing program to promote cooperation between Government and industry in the development of effective training equipment, and foster an exchange of new ideas in simulation technology.

Uranium market activities

Abstract: The market for natural uranium continues to generate much interest. Uranium supply, pricing and procurement have become very complex in the short history of the commercial nuclear industry. Available data on procurement and prices and their relation to uranium requirements are reviewed.

Commercial Equipment: Stretching the Defense Dollar.

Abstract: : This report provides an analysis of the increasing role of commercial equipment within the Department of Defense (DOD) in the weapons system acquisition process. The report answers the question 'Why Commercial' and highlights the benefits of off-the-shelf procurements. It also provides a summary of existing DOD commercial equipment programs and regulations. Specific examples of current and planned commercial acquisitions are provided for both strategic and tactical applications. The report concludes with how DOD can further enhnace its commercial acquisition posture. (Author)

Organizational decisions for food procurement in hospitals.

Abstract: Effective food procurement is an important foodservice management function and has been established as a complex managerial process facilitated through organizational decision-making. Although the importance of decisions made by dietetic professionals responsible for food purchasing is currently increasing because of world and national concerns, the findings of this survey revealed a gap between theory and practice of food procurement. Some trends were revealed concerning the academic preparation for food procurement in the curricula of various educational programs. Entry-level competencies in buying food need to be defined. To educate students to be competent in food procurement decisions, effective planning and working relationships among administrative personnel in hospital foodservice operations and college and university educators are necessary. The twenty criteria for effective food purchasing and the associated specific practices provide a basic approach for such effective planning and working relationships.