Explain why procurement is such a problematic area for the military
What issues somewhat unique to the military make it necessary to utilize a variety of different procurement contract in order to attempt to get the correct output delivered at the lowest possible price? List four general types of procurement contracts.
If all purchases by the military were "off the shelf" items, the military would have little problem efficiently purchasing output from suppliers. For many goods demanded by the military however, the goods do not yet exist, or if they do exist, the military is the only market for the good. Perhaps more importantly, the military is often contracting for items more technically advanced than anything that currently exists today. Thus there is considerable uncertainty surrounding the projected costs and possibility of developing some of the items demanded by the military. For general types of purchasing contracts can be used to procure items, each of which has advantages and disadvantages. The four types are: fixed fee, cost plus fixed fee, cost plus percentage fee, and costs plus incentive fee.
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