An evaluation of the total package procurement -

304 Pages·2008·10.31 MB·English

LIBRARY
OF THE
MASSACHUSETTS INSTITUTE
OF TECHNOLOGY

Research Program on the
Management of Science and Technology
AN EVALUATION OF THE
TOTAL PACKAGE PROCUREMENT CONCEPT
AS EXEMPLIFIED BY THREE AIR FORCE
WEAPON SYSTEM CONTRACTS
Albert J. Gravallese
June, 1968 #330-68
The author is with the AVCO Corporation, Wilmington, Massachusetts. He
was Program Manager, Mark 1, Penetration Aids, before joining the Sloan Program
for 1967-68. This study was his thesis for the degree of Master of Science, 1968,
RECEIVED
OCT 17 1968
M. 1. T. LI3RAKIES
AN EVALUATION OF THE
TOTAL PACKAGE PROCUREMENT CONCEPT
AS EXEMPLIFIED BY THREE AIR FORCE
WEAPON SYSTEM CONTRACTS
by
Albert J. Gravallese
Submitted to the Alfred P. Sloan School of
Management on May 17, 1968 in partial ful-
fillment of the requirements for the degree
of Master of Science in Management.
ABSTRACT
A recent trend in Air Force procurement practices has required potential
contractors on major weapon systems to compete for fixed price incentive con-
tracts covering all phases of system acquisition--research and development,
production, and as much follow-on support as feasible. This total package pro-
curement concept (TPPC) represents an attempt to circumvent the weaknesses
of conventional procurement practices, which involve separate, sequential con-
tracts for development and production.
This study evaluates the TPPC by comparing its intended objectives with
the actual experiences of contractors and Air Force procurement officers.
Three specific total package contracts were studied:
1. Lockheed's C-5A military cargo transport;
2. Boeing's AGM-69A short-range attack missile (SRAM); and
3. Avco's Mark 17 reentry system.
Although none of these contracts has been completed, each has progressed far
enough into development to permit meaningful assessment of performance.
A review of the literature and personal communication with the "architect"
of the TPPC provided a definition of the concept's intended objectives, against
VI
which performance could be evaluated. Performance was judged by interviews
with senior-level contractor and Air Force personnel who guided the programs
listed above.
Results of the study show that, in general, the total package procurement
concept falls short of its intended objectives. Its major advantage is the provi-
sion of firm government visibility of probable production costs. However, sys-
tem requirements do not seem to be better defined; "buying-in" continues to
prevail; and maintainability, reliability, and economy are not significantly im-
proved. In addition, some benefits ascribed to the TPPC are actually common
to all competitive fixed price incentive contracts (i. e. , efficiency and careful
selection of sources of supplies).
Based on these conclusions and other observations provided by the study,
it is recommended that strict limits be placed on candidate programs for total
package procurement. Only those programs which are generally independent of
any major system, and whose systems effectiveness can be quantitatively defined,
should be considered for the TPPC. Candidate programs should also have a
very low probability of change, and should not include undefined multiple and/or
concurrent interfaces. Strategic -weapons are not good candidates for total
package procurement, nor are systems whose qualitative performance param-
eters are based on assessments of enemy capabilities.
Thesis Advisor: Donald G. Marquis
Title: Professor of Management
TABLE OF CONTENTS
CHAPTER PAGE
INTRODUCTION
I. 1
Problem Definition
1
Method of Analysis 2
Related Studies 4
Study Approach 6
CONCEPT DEVELOPMENT
II. 9
Early History 9
Toward Incentive Contracts 10
Toward Competition 11
,
Toward Fixed Price Contracts 13
Toward a New Concept 14
The Total Package Concept 18
Future of TPPC 23
ELEMENTS OF THE TOTAL PACKAGE PROCUREMENT
III.
CONCEPT
25
Pre-contract Activity 26
Contract Definition 29
Contractor Activity 33
Government Activity 34
Model Contract Development 35
General
35
Special Provisions 37
CHAPTER PAGE
Source Selection 44
Development Administration 46
IV. TPPC APPLICATION AND RESULTS 47
Basic Premise 48
Weapon Acquisition Process 51
Selection of Competitors 55
Concept Formulation 58
Contract Definition 63
Schedule 63
Cost 66
Manpower 70
Proposal Activity 72
Data Submittals 73
Cost Data 75
Model Contract 79
„
Collaboration 81
Technical Transfusion 84
Source Selection 85
Development Program Implementation 90
Risks versus Profits 91
Management and Control 144