Design and Implementation of AIP
Published Date: July 1, 2003
The Navy began offering a new pay, Assignment Incentive Pay (AIP), in June 2003 to encourage sailors to volunteer for and remain in difficult-to-fill billets. Sailors may bid on AIP-eligible billets during the detailing process. If selected, they then receive AIP monthly for the duration of their tours. To evaluate AIP’s design and implementation, we modeled simplified bidding systems, reviewed auction design materials, and discussed the Navy’s assignment system and potential bidding systems with auction experts and Navy personnel. We highlight, in this annotated briefing, our concern that gaming may occur; we also identify several options to mitigate it. Encouraging competition is among the most promising strategies to minimize gaming. Other mechanisms, such as encouraging early bidding, are also worth further investigation. In sum, we believe AIP offers the Navy a potentially effective distribution tool, but it is likely that the AIP system will require adaptations as it evolves. We urge the Navy to increase sailors’ awareness and understanding of AIP but to implement AIP gradually and allow flexibility in the decision rules. The Navy can then assess the pilot’s success and can test, model, and implement strategies to increase AIP’s long term cost-efficiency.
