| Case Studies |
| Below are topics from recent CAPE activities that might serve as case studies in public administration for economics courses at either the undergraduate or graduate level. Each topic includes a brief description of the main issues, with links to downloadable PDF files that provide more detailed background and analysis. Please scroll down the page to view the different case studies topics. |
| Performance Contracts |
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The Department of Defense has recently started to use performance contracts with
defense-related organizations that are not part of a military department (formally known
as "defense agencies and activities"). This case study would explore the
challenges involved with increasing the economic efficiency of these organizations,
including identification of the differences in incentives between private and public
sector organizations, as well as some of the difficulties associated with using common
private sector metrics for evaluating performance. The case study could examine the
suitability of performance contracts as a public management tool using traditional
economic metrics (e.g., cost, reliability, quality, responsiveness) rather than relying
merely on the budgetary controls typically used by government entities. It could review
existing DoD contracts to evaluate whether and how some of those challenges are currently being addressed.
Background Readings: "Information Paper" on the Defense Agency Task Force Performance Contract Effort", a brief summary of directives that established the performance contract requirements, and some recent accomplishments. Examples of FY00 performance contracts for various agencies. |
| Two-Tier Pricing |
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The Defense Working Capital Fund (DWCF) requirement that all costs associated with DWCF activities be allocated to each unit of sale on a uniform basis has resulted in some distortions of unit pricing that may be driving customers away from DWCF purchases. This in turn has the effect of further increasing costs on individual items (as infrastructure costs must be allocated across a smaller number of customers) and raising total cost to the military. In the case of the Defense Information Systems Agency (DISA), a decision was made to move to "two-tier" pricing in order to better allocate costs and maintain a strong customer base. Results from this decision can now be evaluated. This case study could also review the causes of the original disincentives and methods for determining an appropriate multi-tired structure, as well as other alternatives to address the challenge of minimizing costs for wartime-required services.
Background Readings: "Issue Paper: Defense Working Capital Fund Task Force" , this paper sets out the background and context for the decision to change the DISA pricing structure, identifies alternatives, and justifies a recommendation to move to two-tier pricing. "Two-Tiered Pricing for Telecommunications Services" , this paper gives an overview of the services provided by DISA and the two-tier pricing methodology. "DISN Two-Tiered Pricing" -this briefing was given to the Program Review Group in May 2000, and describes the major costs and revenues expected to be associated with the two-tiered pricing structure. |
| Defense Health Program |
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The Department of Defense operates a sizeable military health system, one that has been found to exceed the wartime requirements for the provision of care. This excess capacity means DoD facilities may also be able to provide health care for non-warfighters (e.g., active duty dependents and retirees and their dependents) at cheaper cost than if purchased on the open market. Major studies have been conducted about the appropriate size of the DoD medical establishment, to determine how much medical care DoD should "make" instead of "buy." This case study could examine this question and/or related issues such as the mix of medical services that should be provided, and the optimal distribution of the benefit from cost savings from DoD-provided care. In addition, there is a contemporary debate about extending additional benefits to retirees. What economic factors ought to be considered when making a policy decision on this question? And, more broadly, how can DoD minimize costs while meeting rising demand?
Background Readings: "The Economics of Sizing the Military Medical Establishment" (also known as the "733 Study", after the section of law that created it), this is the executive report of a comprehensive study military medical care. It describes the major components of the defense health program, its costs, and basic usage characteristics. "Section 733 Update" this April 1999 report presents the results of an analysis of the required number of military physicians on active duty beyond those needed to support wartime operations. More specifically, it examines the additional number of physicians needed to (1) provide an adequate rotation base for operational doctors; and (2) support the training pipeline for all current and future military physicians. |
| Dual-Sourcing |
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The 1984 Competition in Contracting Act (CCA) required DoD to use more than one supply source if it would foster competition and result in lower acquisition costs. Since then, defense cutbacks have led to consolidation of the defense industry, reducing options for effective competition in some areas. On one side of the argument, many expect competition to lower prices for DoD; on the other, relying on dual-sourcing can have at least two adverse economic effects: 1) loss of economies reflected in "learning" and in lower production rates; and 2) significant non-recurring costs to establish a viable second source. This case study could explore the range of factors to be considered in dual-sourcing decisions, how to conduct relevant analyses, and examine case studies of past systems. Background Readings: "DoD Competitive Sourcing: Questions About Goals, Pace, and Risks of Key Reform Initiative" |