Appropriateness and applicability of the use of performance incentives for warship procurement
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Authors
Basaran, Ismail Zafer
Subjects
Advisors
Hildebrandt, Gregory G.
Gates, William R.
Date of Issue
1994-06
Date
Publisher
Monterey, California. Naval Postgraduate School
Language
en_US
Abstract
The end of the cold war caused defense budgets to decrease in sharp manner. This trend requires the Navy, as a branch of the DOD, to tighten its controls over spending and become more cost-effective. Since warship procurement is among the most important financial transactions of the Navy, one instrument that might improve the cost-effectiveness of the Navy is the use of cost and performance incentives in warship procurement. This thesis studies the traditional and current theories of incentive contracting. It explains the relationship between the cost-effectiveness, and how the use of incentives can encourage contractors to put in a high level of effort on projects so that the government will benefit more. To define the performance level of a warship, analytical approaches, such as the use of an operations research model with the aid of response surface methodology, and the subjective figures of merit model are discussed. This thesis also presents some views on the principal-agent problem, and it expands the idea fusing the contractor's unobservable effort level as means to determine what type of incentives to offer. To compare the traditional and new concepts of incentives, two specific examples are constructed and examined
Type
Thesis
Description
Series/Report No
Department
International Resource Planning and Management
Organization
Naval Postgraduate School
Identifiers
NPS Report Number
Sponsors
Funding
Format
71 p., 28 cm.
Citation
Distribution Statement
Approved for public release; distribution is unlimited.