A Reappraisal of Incentive Contracting Experience

by Irving Nuttall Fisher


Download eBook for Free

FormatFile SizeNotes
PDF file 1.9 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.


Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback57 pages $23.00 $18.40 20% Web Discount

An examination of the cost-saving effects claimed for incentive contracts and of the prospects for increasing their effectiveness. Statistical analysis of 1007 Air Force contracts for major weapon systems, completed during FY 1959-1966 and totaling nearly $15.7 billion, indicates that while incentive contracts may motivate contractors to reduce actual costs, they also encourage them to overstate target costs. The evidence indicates that the underruns commonly associated with incentive contracts are not related to the incentive features of the contract or to improved cost control and efficiency on the part of the contractor. While incentive contracts may make both the government and contractor more cost conscious, other means--increased use of competition and improved governmental cost-estimating techniques--must be employed to reduce target cost and obtain an overall reduction in the cost of major weapon systems.

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.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.