Contracting Optimization via Advanced Economics

I propose a new contracting mechanism to procure healthcare services for Military Treatment Facilities (MTFs). The current preferred contracting method is best economically modeled as a first-price sealed-bid procurement auction. In this paper I project significant cost savings upon adopting second acceptable bid (i.e., modified Vickrey) auctions for agency contracts that include a majority fixed salary with a large (15%) objectively determined variable component based on production and a modest (5%) subjectively determined variable component based on quality.

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