An analysis of the potential use of the Baron-Myerson model by DoD to regulate sole source suppliers

Abstract

This study attempted to determine if the Department of Defense (DOD) could use the Baron-Myerson model as a tool to regulate sole source suppliers under a price-based acquisition process. A spreadsheet was used to analyze the potential for risk reduction when choosing between a Uniform or Triangular probability distribution for use with the model. Personal and telephonic interviews were conducted with practitioners to assess whether conditions necessary for use of the model exist in the DOD procurement environment. The research indicated that, in general, there is no dominant strategy when selecting either a Triangular or Uniform distribution. However, a dominant strategy emerged when the demand level was high, the cost range was narrow and the demand curve was steep. The research further indicated that the pre- conditions for using the model potentially exist in DOD for many cases. Even so, it must be stressed that the model is not well suited for all situations and should be used selectively. This study recommends that DOD continue to explore the use of the Baron-Myerson model to further assess the impact of current legislation on the use of the model and what modifications or waivers would be needed. Finally, DOD should look into conducting a pilot program on a small scale to observe the model in practice. The would allow a low risk method to evaluate the model's potential for more widespread use.