DoD profit policy--its impact on facilities capital investment
Buck, David John
Smith, Raymond W.
Moses, O. Douglas
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Since the 1970 's profit policy has been used as a vehicle to motivate capital investment in productive facilities and equipment. The current policy has increased the factors available for use when determining a profit/fee objective in order to increase this incentive. Defense contractors and Government procurement personnel are interviewed for their perceptions of the effectiveness of the current policy to incentivize capital expenditures in facilities and equipment. The results of the survey showed that: (1) profit policy has been ineffective in incentivizing defense contractors to invest in more productive facilities and equipment; (2) it is not an important factor when deciding on the contractor's capital budget; and (3) profit policy is not being implemented as originally intended. Recommendations include: (1) encouraging greater use of more direct incentives for capital investment; (2) the need for greater accountability of Government procurement personnel on implementation of the policy; and (3) DoD should review and restate the objectives of the policy so the Services have a clear understanding of what is expected and required.
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