Incentives and Contracting for Availability: Procuring Complex Performance

Procuring complex performance where both the performance required and the infrastructure to support the requirement are complex, is the current frontier on procurement knowledge. Trends to bundle contracts for products and services together exemplify the challenge. These product-service bundles take the form of contracts for the use of the product (e.g., including long term maintenance and support) rather than just the product as an artefact. Such contracts bind a Prime contractor and the customer into complex long term agreements. Contractual incentive mechanisms have long been used to align the interests of customer and supplier in such projects. This chapter explores the use and role of incentives in complex engineering support environment, drawing on a case study from recent research on availability contracting to support fighter jets. The chapter presents the challenge to the conventional incentive mechanisms inherent in the combination of flexibility and cost control required in contracting for jet fighters availability.

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