On the Separation of Production from the Developer

Fred D. Arditti

Expert InsightsPublished 1967

An improved method for estimating the costs of transferring industrial production from the developer to some other producer and the optimal time for the separation. The basic tool is the learning curve — in this case, curves relating man-hours per pound to aircraft produced, compiled by Wright-Patterson Air Force Base. A "shift factor" to be applied to the coproducer's curve intercept and slope was derived from experience with five aircraft. For separation to be economically sound, the coproducer's productivity must be great enough to overcome the original developer's advantage of experience. The two cases of real postwar aircraft coproduction in the United States were analyzed. The analysis shows that feasibility of transfer varies with the situation. This opens the possibility of truer competition with resultant savings to the government in military procurement.

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Arditti, Fred D., On the Separation of Production from the Developer. Santa Monica, CA: RAND Corporation, 1967. https://www.rand.org/pubs/papers/P3542-2.html.
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