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Evaluating Five Proposed Price and Credit Policies for the Army

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Abstract:

As the Army moves toward implementation of a Single Stock Fund, some of the important decisions to be made involve the pricing and credit policies that will be adopted. In the spring of 1998, the Army established a Credit/Pricing Integrated Product Team to develop alternative policies and identify criteria for evaluating them. The Arroyo Center was tasked to conduct the evaluation. This documented briefing documents the key findings of that evaluation. Five alternatives were evaluated, including one that has already been selected as the interim policy and a variant of the interim policy that incorporates a number of potential enhancements. The analysis utilized detailed data from across the Army to understand the effect of each alternative on the funds that the field would require to maintain equipment readiness and the resources that the working capital fund must have to remain solvent. The study concluded that the interim policy would be superior to the current policy in many respects, but it includes features that are likely to increase total Army procurement and repair costs. The alternative that included enhancements to the interim policy would likely avoid these shortcomings.