Abstract:
In 1969, the United States Navy signed a firm fixed price contract with Grumman Corporation for the development and production of the F-14 fighter plane. Within months after the contract was signed, however, Grumman began to signal the Navy that development costs for the plane were increasing sharply. When high inflation appeared to compound the cost escalation, the Navy faced problems on two fronts: first, in managing relationships with the contractor; and second, in facing inquiries from increasingly concerned congressional committees. The case examines managerial and political issues and constraints which faced the Navy's two F-14 program managers during the five years necessary to revise the contract and stabilize the program.The case provides a vehicle for the discussion of selection of contract types and raises issues about the feasibility of adversarial and cooperative relationships between defense contractors and military program offices.
