Directed Licensing

An Evaluation of a Proposed Technique for Reducing the Procurement Cost of Aircraft

by Greg Carter


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An evaluation of the feasibility of introducing price competition into military aircraft procurement by the technique of "directed licensing," whereby the Government obtains from a weapon system developer, at the time of issuance of the development contract, a commitment for rights to production data and an agreement to license whomever the Government designates to produce the system during any or all production runs, following initial production by the developer. Case studies of related types of aircraft procurement are presented, showing that competitive bidding has resulted in substantial savings as compared to sole-source procurement. Techniques for moving aircraft production from one manufacturer to another are described to indicate the technical feasibility of the directed licensing concept, and a minimum-risk way in which directed licensing could be tried is outlined. In view of the potential significant cost savings that could result from the introduction of directed licensing, the report urges that the concept be tested in practice. Although this study focuses on aircraft procurement, the results should be equally applicable to procurement of other complex weapon systems.

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