Research On The Credibility Of Commitment And The Breach Of Weaponry Equipment R&D Contract

Contract was introduced into weaponry equipment R&D program to constraint the dealers and promote them to work hard. But there were many breach cases of weaponry equipment R&D contract both in China and abroad. With game theory and information economics as analytical tool,the paper investigates the incentive structure of players during the fulfillment process of weaponry equipment R&D contract,the mechanism of breach case,advantages and disadvantages of those three kinds of contract enforcement mechanism,the contract management practice of foreign country and corresponding enlightenment,and then,based on these analysis,the paper discusses the enforcement mechanism of weaponry equipment R&D contract with credible commitment as core.As a kind of typical incomplete contract,the weaponry equipment R&D contract has the characteristics of administrative contract and economic contract. There are a lot of uncertainty in the contract execution environment. During the weaponry equipment R&D process,breach cases of weaponry equipment R&D contract from military includes payment delay, technical specifications modification and contractor replacement after the signing of the contract. Breach cases of weaponry equipment R&D contract from contractor includes schedule delay,quality decline and price overrun. From a macroscopic point of view,the frequency and number of the breach case of contractor is much higher than that of the military. From the microscopic point of view,the breach case of contractor shows more complexity.The acquisition department generally would threaten to punish the Contractor’s default behavior,but the implementation of this threat is constrained by the objective environment and its own capacity,therefore reducing the degree of credibility of the threat. Under this background,rational contractor will opportunistically exaggerate their technical and economic strength in order to get the contract,then adopt various measures to renegotiate with acquisition department in the contract execution stage around the original contract. Facing great temptation of the weaponry equipment R&D contract,or constrained by their limited rationality,contractors’ cautious consciousness may be weakening,and they may become blindly optimistic,and can not accurately assess their technical and economic strength and the difficulty of the project,resulting in passive breach case of weaponry equipment R&D contract.Incredible commitment affects the performance of the weaponry equipment R&D contract. In order to promote trading process,we should take actions to build credible commitment and improve the quality of contract performance. To construct credible commitment, it is needed to give up promise’s flexibility. When violation of commitments are very costly case, commitment is irreversible, so that the implementation of the commitment to punish bad behavior is the only rational choice,and then the credible commitment is constructed.Three kinds of contract enforcement mechanisms include self-enforcing,second party and third party enforcement mechanism. Self-enforcing enforcement is based on the interest calculation of the players themselves. The threat of retaliation during multi-stage game is the core of second-party enforcement. For these contents of contract which can be observed,law can be used to guarantee its implementation.When the military threat to punish the breach case of contractor,it should take actions on organization construction,acquisition strategy and regulations,in order to make credible commitment for the fulfillment of weaponry equipment R&D contract. The laws and strict supervision are the basis of credible commitment. The construction of organization system and the smooth relationship between organizations are guarantee of the credible commitment. The reasonable system mechanism and work flow are the key of credible commitment. The excellent quality of players and the efficient acquisition strategy are the core of credible commitment.To prevent the breach cases of weaponry equipment R&D contract,we should establish a multiple contract implementation mechanism including third-party enforcement,second-party enforcement and self-enforcing mechanism,and with the concept of “fire alarm supervision” and “patrol supervision” as guidance.The revenge of the players themselves play a kind of “patrol supervision”role. The laws regulate contractors performance,and play a kind of “fire alarm supervision”role. With the influence of the second-party and the third-party enforcement mechanism,it forms a kind of credible commitment,and the contractor will therefore form a stable expectation that good fulfillment performance would be beneficial. Of course,if the contractor has no fulfillment ability,it could not fulfill the contract obligations. Therefore, with the help of the third-party and the second-party enforcement mechanism,we should select contractor seriously with technical and economic strength and reputation as standard,and encourage them to implement the contract carefully by proper mechanism and measurements.