Cost realism in defense contracting

K. T. Wallenius and Norman Womer

Naval Research Logistics (NRL), 1989, vol. 36, issue 5, 533-557

Abstract: In this article we report and evaluate a technique developed by the U.S. Navy for the purpose of choosing winners of Research and Development (R&D) contracts from among several competing contractors. The technique is intended to discourage “buy‐in” bidding (i.e., submitting unrealistically low bids for the purpose of winning the bidding competition). We conclude that, within our decision scenario, the technique tends to induce bids that are close to the contractor's expectation of the government cost estimate. The article is descriptive (we discuss the scenario and an existing approach), prescriptive (we offer cost realism scoring rule admissibility requirements), and projective (we explore how admissible realism scoring rules should affect contractor behavior).

Date: 1989
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https://doi.org/10.1002/1520-6750(198910)36:53.0.CO;2-1

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Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:36:y:1989:i:5:p:533-557

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