Rate stabilization at Navy industrial fund research, development, test and evaluation activities.

Abstract

The 13 Navy industrially funded RDT&E activities implemented rate stabilization in October 1976 under protest. With rate stabilization, DOD industrially funded activities bill their customers on the basis of stabilized billing rates that cannot be adjusted during the fiscal year as costs change. A basic objective is to allow customers to plan for cost escalation during a fiscal year by using rates established up to 15 months in advance of the fiscal year start. This thesis examines the operating results of rate stabilization at NIF RDT&E activities 18 months after implementation, in order to determine the degree of success in meeting rate stabilization objectives. Questionnaires and Financial Statements were used to gain research data. Conclusions are that the RDT&E activities and their customers have opinions that rate stabilization entails more disadvantages than advantages. Rate stabilization is not meeting the objective for which it was implemented since a minority of the RDT&E customers use the rates in budgeting.