As contracting can be seen to take place not only concerning allocation or the provision of goods and services. Reorganization or income maintenance programmes might be selected 'contracts' between politicians on the one hand and the populace on the other hand. One could make a peculiarity between true contracts and symbolic contracts here, as talking about some things as 'contracts' is simply using a metaphor. Contracts as fiction are characteristically indefinite, as it is far from clear that the contracting parties are, when the contract was in fact made and how it is being observed or monitored. Fictional contracts cannot be implemented by a third party.
Classification of procurement is so diverse from the world of the models, and their consequent implications, used by economists in learning procurement contracting that two conclusions seem acceptable. The first is that there is substantial opportunity for optimal contract theory to contribute to better efficiency in defense procurement. The second is that the authenticities of defense procurement have significant implications for how economists must study contracting incentives and competence in defense procurement.
Procurement comprises a wide variety of goods ranging from standard items such as uniforms and ammunition to major weapons systems whose acquisition might take ten to fifteen years to complete. Procurement of standard items is acquiescent to competitive bidding and fixed-price contracts, but competition and fixed-price contracts are less, and negotiated contracts more, proper for major weapons systems that are composite, involve yet-to-be-developed technologies, and have performance objectives that might be unattainable or impossible at reasonable cost. Particularly in the case of systems that entail research and development, the capability to anticipate future technological developments is limited, and even if the possibilities can be recognized, it may be impractical to offer contractual contingencies for all potential events.
Understanding procurement process
The complications of major weapons systems acquisition are replicated in the procurement process which comprises a series of stages commencing with defense preparedness planning, program outset, initial research and development, source selection, system development, production, and follow-ons (e.g., spares). The production and follow-on phases are the most acquiescent to economic modeling and analysis, but numerous of the determinants of program cost and weapons system performance have already been mostly decided by the time a production contract is negotiated. The subject of economic analysis thus must be on the larger procurement proces