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A study of the methods by which the Air Force and other government agencies can keep development contract costs within reasonable bounds. The role of task uncertainty in the problem of contract cost control is emphasized, and it is argued that in many situations the adaptive responses of the firm can vitiate the effects of contractual arrangements aimed at reducing costs through profit-sharing incentives. The analysis concludes that one of the most effective ways to strengthen cost controls is to reduce the task uncertainty associated with contract negotiations. An adaptive response model is presented in an appendix. (See also RM-2482-PR, RM-2948-PR.)

This report is part of the RAND Corporation research memorandum series. The Research Memorandum was a product of the RAND Corporation from 1948 to 1973 that represented working papers meant to report current results of RAND research to appropriate audiences.

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