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Approved for Release: 2017 /01 /25 C05096190 ,,,.-. . 

·· :-·r R ement: Procurement.· 

S'C::.:..:CT: Special Incentives for Satellite Programs 

As pa.re of the Special Projects activity of the Air Force, 

· - :i::~s bscn found e:i;ped.ient and effective iu particular in- ~ 

::·:::;.~:..:.ss to structure contra.ct incentives for satellite systems 

_:.::::;:ily on a mission perfo:.."mance basis rat...~r than· on those 

~=-::s::.::::::ec ;:.:hi.eh are more conv~t:ionaliy used. It is possible 

to -;:se t:7::.::.:ce incentives centc::'ed on mission performance because 

of tl'L~ :'.'.:::...::~ that tt:.e systems are S.""cpended very shortly after 

d.eliv~ry .::~::d because the developmeut ... procure:me~t cycle is a 

contirrt:!:t!m,.. 

:Je E·~::"J·:; no~ come t:o the conclusion that it would be in the 

int2~est of the Govarn~..ent to apply these mission perform- --.. ~-.,;.. in:. :::.:~::i1.."'cs more broadly in the Special Project: Satellite -

:-:::.::_:'._·::.m:..:.. Hl~le we believe, that the proposed actions are clear-

: __ / ,::::.d:::C:~1 the general i.nte:lt of incentive contracting as out-

. jfo::: e.Y.,ample ~ there appear to be some provisions or implic.:.t::c:2£~ i.:l the .. ~.SPR. -wb.ieb. c~ be in::oTpreted either to prohibit 

r::.0rG: 3E~1-:;:;;.:::cl use of eartain cf the p;::cposed incentive features 

::::: ~~,::;:.zlc require justificat:icn s.nd high level review and approv-

.::.1 c:l au :!:ncl.i.vidual contract basis. -~~~ 

-------"'·· ... -,,__.,,, ............ 

Details of the proposed' i::.1.ccr::tivc structure for satellite 

projact:s and the underlying rationale are contai'f!..ed in Attach• 

:::::;nt 1.. 'Z."1.e .ASPR. provisions "t;:i:-:.ich, in greater or lesser degree,. 

cppear to prohibit or inhibit applic~tioa of the proposed iuc:::.:t:i ~:s ere discussed ·ia Attachment 2 .. 

Your approval for the applicat:icn of the contract incentive 

::.. ::-.::cc..:t.ure described in Attachment l t·:: the projects directly 

L::.:~":.c:..zed by the Office of the secret:zry of the Air Force (llAFSP) • 

Approved for Release: 2017 /01 /25 C05096190 

SAFRD Chron 

SAFRD Hold 

SAF FILE 

S.AFSS~ 

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Approved for Release: 2017 /01 /25 C05096190 

provisions cf tha 

requeste¢1 .. 

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J>,.le::;:,s.oder ~!. Flax 

Assistant Secretary 

2esearch & Development 

1" S::::-;,::·ialized Incentive Contract 

S~=~ct-u.re for Satellite Projects 

2.. St:.-22Z:ty of AS?l! Conflicts 

2 

Approved for Release: 2017 /01 /25 C05096190 
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Approved for Release: 2017 /01 /25 C05096190 • I~~ 

"lf 

Subject! Authority to Use Special Incentive 

To: Director of Special Projects (SAFSP) 

. Based upon Department of Defense approval, copy attached, 

~".._·,. 

you are authorized to incorporate in the SAFSP contracts the 

specialized incentive concept outlined in the paper, "A Specialized 

·.~lo. 

. Incenti~e Structure for Satellite Pr.ojects", (Ref No. SP142866) ....... ~ .. · 

ahd deyia.te from such provisions of ASPR and related regulations 

as mighthe in conflict therewith. {!.. '. . .~ . ; . ~· ~ 

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ALEXANDER H. FLAX 

Assistant Secretary 

Research and Development 

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Approved for Release: 2017 /01 /25 C05096190 
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Approved for Release: 2017 /01 /25 C05096190 

Sl.J?ILP/Hr Co·:c:/mcw/28 Sep 66 

20SE?1S56 

SlJBJECT: Special Incent:?_ves for Satellite Programs 

Mr. Ignatius' people in OASD(I&L) have informally 

discur;r.<.?.d with 01..tr office your memorandum of August 20, 

1966, to Hr. Ignatius reql1csting <:n:.thority for certain 

ccviatio;:-,.s frolli ASPE. in respect to special incentive . 

,;::;.:rrange!i"_ents. In revie1;iing this ir.atter we have concluded 

t:l:.~t the special incentive arr~.ngG;nsnts would not deviate 

frc::r:. ASPR. ·The Office of the Ger:terr.;l Comi..sel concurs, and 

CSD (IU:L) also conc~urrc:d, info1;::u;.lly. Since we underst::lnd .c~-~,.,.,· c;,1:;c.:;~ (C·Ol.~ lT,..-r-+-t,,..,,-,n) t-h····'· ·i..'-1·'"' ·0-11 'r ,.P.:".,"'!OU for you-r_ -......;.. VW.i. J ...... ~ V~ . W• V- \..i.J;...l.i ... c.-. -"""~ 1- .,L,t._ .l .,_.J J;.. ~-.. _. 

i\fritin.; tp }Ir-. !L'Tlatius tJD.G tl1at it \·J~;.s possible that an 

AS?R deviztion would be involved in the proposal, it now 

fl;::.y.:-1e,;:.-rs to be unri.e:cess.::ry to involv2 J:t:. I;;n.ntius in this 

rr2tte::. Con.seqi..::cntly, 1.1.:nlGss you have some obj ectio;:i, 

C-ASD (I&:L) will not reply to you:r memorc::.nch.un of Augi.::.st 20th. 

, -~ _we h:.ivc some reserv.r:-ticn about ccrta:\,q ?eta!.ls of the 

SA:: Sk' p::-oposal., but w2 w:i..11 work thestJ ou~wi.th Colonel 

~iortb:.::.'ln {and with SAFSP if ne::::cssz.ry) on an info:tw.zl lJasis. 

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('51.gnca) 

AA1?.cn:1 J. mcusn:t 

Deputy L:·::::·i_;,~·'.:-2. : '8::retary 

(Procurement) 

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Subj 

SAFAAM 

Approved for Release: 2017 /01 /25 C05096190 
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I 

. · Approved for Release: 2017 /01 /25 C05096190 

MEMORANDUM FOR THE ASSISTANT SECRETARY OF DEFENSE 

(INST ALLA TIO NS AND LOGISTICS) 

· SUBJECT: Authority To Use Special Incentive 

Due to the critical nature of programs under control of my 

Director of Special Projects, he proposes to use a special incentive 

formula on some contracts. Details of his proposal are contained in 

his letter of 27 April and attachments thereto, copies of which are 

. attached. 

I have reviewed his proposal and agree with his approach. His 

. proposal is addressed to objectives of the highest importance, and 

· · appears to be con,~istent with good procurement practice. Your 

·· ... '·approval of the aH~ched request for deviations is requested • 

.. . 

-~. . 

I Atch 

cy ltr (SP- I) 27 Apr66 

subj: Request for Auth 

to use Special Incen Features 

w/Z·Atch 

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•·; 

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·ALEXANDER H. FLAX 

Assistant Secr~tary 

Research and Development 

Approved for Release: 2017 /01 /25 C05096190 

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