How To Build Cost-Effectiveness Into Defense Contracts
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by: Mtichell Griffiths
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Word Count: 443
Date: Thu, 3 Nov 2011 Time: 1:34 AM
In the prevalent unstable economic conditions it is important to think about the amount being spent on the development of weapons system. Already, Defense contracts are being drawn up keeping this in mind and a lot of defense contractors are incorporating affordability initiatives into their program development plans. Recently, in an address to defense industry executives, the Pentagon?s chief weapons purchaser sent a clear message. He said very clearly that all the new weapons including the SSBN-X, ground fighting vehicles and long range strike weapons have to be built keeping affordability in mind.
This was due to the fact that defense budgets will be lesser in coming years. As long as the funds gushed in the last two decades, there was plenty of waste and abuse of these budgets. But from now onwards, like other industries in the country the defense industry will work on incentives which will increase the output and the quality as well.
Defense contractors will now have to think about adapting the same changes that make the prices of products and services drop gradually in the private sector. Carter believes that since the cost of computers falls consistently then the price of weapons must fall as well.
This attitude will mean that there will be a lot lesser cost-plus deals and more fixed cost contracts. The government has decided to trim the defense budget for the coming 12 years by over $400 billion and this will have an influence on the contractors.
To make a contract more affordable you have 4 choices. The first point is to make sure that you enhance the way you understand and manage the needs the incentives and many schedules , which will help in improving cost management. To make the product more affordable there are two parts, one is improving the process and the other is improving the product. Affordability can be built into defense contracts by adapting new manufacturing ways or new materials to enhance the final product. It can also be built by incorporating changes in detailed production plans and workflow.
Another way of building affordability into defense contract is to promote greater competition. Also, government must get rid of redundant capabilities and there should be more direct acquisition management at all levels. It will also make sure that there is more competition. Every single bid offer should go through a elaborate cost analysis and so must any non certified data as it will help in promoting competition. It will also help if the criteria for evaluation were made better and the time it takes for evaluating is improved. To increase the competition the government can also for competing knowledge based services more frequently.
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