Abstract

In the U.S. Since the end of World war II, the relationship between the government and the firms in the aerospace industry has considerably changed. In 1961 when Secretary of Defense Robert S. Mcnamara assumed office, dramatic changes were introduced. He introduced many new devices, which improved the efficiency of procurement process. These arrangements were considered successful. These institutional arrangements include devices as breakouts, an emphasis on incentives and fixed price contracts, and contractor evaluation procedure. This article examines the patterns of existing institutional arrangements, shows how they are related to vertical relationships which prevail in the industry and analyzes the benefits which have been obtained from these management patterns. The author further shows that there are additional devices, by which further procurement efficiencies may be obtained. It is not apparent what all those new procedures will be, but certainly they will focus on attempts to encourage technical progress and innovation within the firms.