The impact of inflation on profit as determined by contractual provisions of Naval FPIF shipbuilding contracts.
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Authors
Ippel, Terry Alan
Subjects
Progress Payments
Profit Erosion
Incentive
Inflation
Naval Shipbuilding
Escalation Clause
Payments Clause
Contracts
Profit Erosion
Incentive
Inflation
Naval Shipbuilding
Escalation Clause
Payments Clause
Contracts
Advisors
Sovereign, Michael G.
Date of Issue
1976
Date
March 1976
Publisher
Monterey, California. Naval Postgraduate School
Language
en_US
Abstract
The contractual provisions contained in Naval FPIF Shipbuilding
contracts determine to a large extent the impact of
inflation on contract profitability. The concern of shipbuilders
regarding the inflationary erosion of profitability
is due in part to the long-term nature of shipbuilding
contracts
.
An analysis is made of the payments and escalation provisions
contained in fourteen major shipbuilding contracts
signed over a span of eight years. Profit profiles for
seven of these shipbuilding contracts are generated based
upon six payment thresholds. The profit profiles, when
expressed in terms of deflated dollars, present value at
15% and present value of deflated dollars at 157% show a
declining trend in profitability.
Three separate approaches for providing escalation
coverage for profit are discussed. It is recommended that
one of these approaches be implemented in future shipbuilding
contracts
Type
Thesis
Description
Series/Report No
Department
Administrative Sciences
Organization
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NPS Report Number
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Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.