Defense Procurement and Public Utility Regulation

by George R. Hall


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This study compares the control of procurement prices and profits with the system applied to public utilities. The possible application of public utility regulation to weapon system producers is also considered but rejected. Despite differences in the reasons for regulation and in profit determination, both systems base prices and profits on costs. Since the major procurement problems stem from the cost-based nature of profits, they would not be solved by public utility regulation. Policy emphasis should be on minimizing the need for regulation by encouraging competition through total-program-package procurements, second-sourcing and other atypical acquisition strategies.

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