An analysis of the U.S. Navy's military housing privatization initiative and the application of transaction cost economics as a component of the decision framework for the establishment of future partnerships between the Department of Defense and private sector industry
Hoang, Trihnh H.
Pham, Tuan-Anh T.
Franck, Raymond E.
Mutty, John E.
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The Department of Defense (DoD) has struggled with the issue of inadequate military family housing for decades. Furthermore, Congress has made numerous attempts to resolve this problem culminating in the passage of the 1996 National Defense Authorization Act. This Act allowed DoD to implement as many as twelve different authorities to meet this housing challenge, including the ability to form joint ventures with private corporations. The Navy's innovative use of the joint venture authority has facilitated the renovation and creation of military family housing at an unprecedented scale and pace. This study provides an overview of the Navy's use of the joint venture authority. Additionally, the concept of Transaction Cost Economics is explained and applied to the Navy's contracting template for analysis. The research concludes that the twelve authorities, especially joint ventures, have provided effective means to resolve DoD's military housing dilemma. Additionally, the application of Transaction Cost Economics has proven beneficial to minimizing opportunistic behavior on the part of private partners and/or subcontracted entities.
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