DEFENSE CONTRACTS: Flying Before Buying

The scandalous cost overruns in defense contracts largely have been due to a Pentagon system called Total Package Procurement, or TPP, which was started by former Defense Secretary Robert McNamara. TPP contractors did not have to build prototypes, and they were allowed to kick up prices if they were hit by inflation or unforeseen technical problems. Result: foxy contractors "bought in" to contracts by deliberately underbidding, then collected huge overruns as costs soared.

After long urging by former Deputy Secretary of Defense David Packard, the Pentagon is now moving to a fixed-price "fly-before-you-buy" system. In the first award in years...

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