Contracting for Complex Products

Report Number: NPS-AM-10-073

Series: Contract Management

Category: Contracting

Report Series: Proceedings Paper

Authors: David Van Slyke

Title: Contracting for Complex Products

Published: 2010-04-01

Sponsored By: Acquisition Research Program

Status: Published--Unlimited Distribution

Research Type: Other Research Faculty

Full Text URL: http://acquisitionresearch.net/files/FY2010/NPS-AM-10-073.pdf

Keywords: Contract Writing

Abstract:

The US Federal Government spends just under twenty percent of its budget buying everything from paper clips to complex weapons systems. Effective contracting promises win-win exchanges: governments gain efficiency and qualities not available through in-house production, and vendors win because the price is above their production costs. Markets are most likely to produce win-win outcomes when buyers and sellers can easily define and verify product cost, quality and quantities. We call these simple products. Markets for simple products tend to have large numbers of buyers and sellers who are well informed about each others