Cost Minimization and Uncertainty in Defense Manufacturing

This paper presents a mathematical model for two purposes. First, it extends the theoretical analysis of annual contracting to the more general case of uncertainty as to the magnitude of year-two procurement, as opposed simply to its cancellation. The second is to assign parameter values having at least some empirical grounding to the Utgoff-Thaler model, thereby providing a basis for assessing quantitatively the consequences of the theoretical results for both annual and multiyear contracting.