1959 3IlcLean: Group Contracting 71

tion. Naturally, management will make its own decisions blind optimism, the discipline of marketing research toregarding the significance of the study and the course of provide a factual basis for decision. It is probably un-action to be taken. This does not relieve the interpreters, necessary to add that methodologies and disciplines arehowever, from their responsibility of submitting a com- no better than the men who implement them. Just as youplete report to management. want the best brains available for your creative engi-

In summary, then, it can be proposed that companies neering projects, you should also require the best brainshave a two-fold problem if they are to survive and pro- for your marketing research projects. You need men ofgress. First, they must actively support a market and competence, special training, judgment, and convictioncustomer oriented research and development program to do the work. To paraphase an old quotation you hadwhich will keep pace with technological developments better "know nothing" than "know what isn't true."and requirements, and second, they must reduce the risk Without men of these attributes, you will not be materi-of failure inherent in such activities by using, rather than ally reducing the risk of failure.

Group Contracting*JAMES D. MCLEANt

Summary-The pattern of military electronics procurement in formed and have experienced successful growth-basedrecent years has shifted away from large-scale production of rela- largely on high technical competence. However, in Lostively simple systems-black boxes, they may be called-and to-ward the development and production of fewer systems of increas- Angeles, most oanizationsin o ndu still dnoing complexity. To meet the challenges imposed by this change, begin to possess adequate technical and management re-the industry has found it necessary, in many cases, to form teams sources to handle large weapon system procurements byof specialist organizations, each possessing one or more of the themselves, nor can they acquire this capability withcapabilities necessary for the task in question. conventional ways of hiring assistance.Although the structure of the relationships which bind the team

together may vary, the basic attributes are the same. In this paper, We at Hoffman know that group contracting iS an effec-the characteristics of team contracting are revealed and the ad- tive solution to the procurement challenges of the future,vantages of this form of solving specific military problems are due to our pioneer interest and experience for the lastdiscussed. year and a half in this method of contracting. Comments

and articles on this subject have been published by ourT HE subject of group contracting is very much in board chairman, H. L. Hoffman; in particular, one

the news today and has been in our thinking at article in the May 6, 1957, issue of Aviation Week. InHoffman Laboratories for quite some time. this article, Mr. Hoffman clearly foresaw and detailed

There has been a dramatic change in the pattern of the future role of the specialized manufacturer as a teammilitary electronics procurement in recent years. The member in the cooperative development of complex elec-trend is away from large scale production of relatively tronic systems.simple systems toward the development and production Last year we put these theories into initial practiceof ever fewer systems of increasing complexity and with the formation of a team to acquire and prosecute thesophistication. The development of these systems is development and supply of a complex electronic recon-characterized by tremendous technical challenges. To naissance system for the United States Air Force. Thatmeet these, our industry must create new kinds of organi- program is currently in its developmental phases, underzations with higher degrees of technical competence and Hoffman leadership, in seven different organizationssuperior management skills. throughout the United States.Our electronics industry is relatively young and far There is nothing mysterious about either the theory or

from mature in either its products or its markets. More practice of group contracting; first and foremost, it is athan half of our company's products did not exist ten means of combining the efforts of two or more organi-years ago. In the last decade, a great number of small zations into a task force for the purpose of solving aand medium sized specialist organizations have been specific military problem. The particular structure of the

relationships which bind the team together, that is, theform of the agreements involved, can be quite varied.

* Manuscript received by the PGEM, May 29, 1959. This form is unimportant, as long as the arrangementt President, Hoffman Labs. Div., Hoffman Electronics Corp.hatrebsiatiue.

Los Angeles, Calif.hathe scatrbe.

72 IRE TRANSACTIONS ON ENGINEERING MANAGEMENT Septemnber

1) The team leader retains undivided singlepoint re- is of particular importance that simple and streamlinedsponsibility to the customer for the timely and effective management methods be developed and proven. This isperformance of the entire job, and possesses complete the key to effective operations across the boundaries ofauthority in his dealings with the other team members separate organizations.to assure, effectively, their concurrence with his manage- 2) As each part of the work plan becomes clearer, thement direction. final participation of each team member is clarified. This

2) While the final authority and responsibility for pro- may necessitate the dropping of some team members andgram performance is undivided in the team leader or their replacement by other organizations. Concurrent withweapons systems manager, the initial definition of the the development of the work plan, allocation and com-program and all matters of broad operating policy to be mitment of the requisite physical resources and plantexecuted by the program manager are determined co- facilities is accomplished. The objective of this planningoperatively. All participating organizations must have a phase is to assure immediate readiness to perform uponreal voice in policy matters, and this can readily be pro- award of the contract.vided through a management policy group with repre- 3) At Hoffman, we consider it essential that the indi-sentation from all organizations involved. Such representa- viduals who define the job will also later execute thetion is essential in order to provide the proper working program. We wish to retain the pre-contract experience,relationships between all team members-the atmosphere enthusiasm, and cooperation within the actual program,of a true development partnership. and this is best accomplished through retention of the

3) The team leader must select the project director, individuals involved in the planning and proposal ac-the technical director and the operations director in tivities.advance of the selection of team members-and prepara- 4) The depth of planning required from each teaintion of the proposal. member is necessarily such that the determination of

future performance, personnel, facilities, and other re-Again, mandatory for a successful group effort, are the sources is quite detailed as compared to other forms of

undivided responsibility and action authority for the team contracting. Group contracting necessarily involves theleader (providing real assurance of on-time, in-dollars, activities of a number of organizations. Since we areperformance), the proper motivation of all team mem- dealing simultaneously with complex tasks and variedbers (providing increased assurance of obtaining the best organizations, all team members require full insight intothinking and efforts of all participants); and the early se- their own task and its inter-relations with all other tasks.lection of the management team. In addition, effective The team leader integrates the detailed planning of allgroup contracting has these characteristics. team members within the framework of a master plan,

1) Each team member is selected to provide a superior and places the ma-ter plan and all detailed plans in thecapability in his particular area of specialty. hands of all team members.

2) Each team member performs a vital role in a majorprogram. Effective control and performance of the planned work

3) The team is formed in advance of the proposal. is accomplished by tying the planning and control ac-tivities together through achievement milestones-ob-

Effective group contracting requires the formation of the jective measurements of accomplishment. It is up to theteam sufficiently in advance of the actual program for all team leader to provide this hard core of planning meth-team members to contribute to the initial concept, the odology and management technique.definition, and the broad planning of the system. This Let us now draw some contrasts between group con-early participation is the key to developing the vital tracting and other forms and arrangements of contracting,interest and enthusiastic cooperation of all team members as they occur in practice, particularly in terms of pro-which we know will characterize effective group con- grams involving the development of complex advancedtracting. In no other way can specialty organizations weapons systems.make such a vital contribution to a complex systems de- The classical version of the relationships between avelopment than by early participation in the formative major prime contractor and his subcontractors is generallystages. that of a master and his servants. At the level of program

This early participation will, under efficient leadership, management concerned only with controlling day-to-dayprovide four very tangible results. results, and at that level only, we have no quarrel with

1) The team leader's selection of team members is con- this relationship of authority. Unfortunately, however,firmed by the work experience and its results-the sys- this relationship most frequently characterizes and domi-tems concept and work plan during the planning period, nates all working relationships between a major prime con-and the preparation of the proposal. As the work plan tractor and his subcontractors. The inevitable result of thisprogresses, the participation of each member is made firm. dominance is that the program is defined almost en-During these preliminary operations of the team, admini- tirely from the point-of-view of the prime contractor, andstrative procedures and lines of communications are de- the best potential contributions of the subcontractorsveloped which will be used throughout the program. It may be completely over-looked.

1959 MllcLean: Group Contracting 73

A great contrast to this is the mode of operation unique lationships involved in that all parties contract separatelyto group contracting which is designed to harness the best with the buyer. This tends to compel cooperation byskills of all participants and to cooperatively define the contract, rather than by creating cooperation throughjob in advance. This is intended to increase the interest, effective working situations. The real program definitionsupport, and desire of all participants to make significant and integration is performed by the buyer. If manage-contributions and to identify their interest with those of ment contracting is not concerned with the initial defini-the over-all program. We seek to expand the horizon of tion of the program efforts, it might better be designatedall participants beyond their particular contractual re- as "administrative contracting." We at Hoffman feel thatsponsibility. We provide continued representation and a "administrative" and associate contracting as definedreal voice in policy matters for all participants. This is above will not necessarily command the full creative con-designed to insure their continuing cooperation and in- tributions of all participants which is so readily providedterest. We consider this essential in order to provide a through group contracting.timely and economic capability to incorporate specifi- The emphasis of this paper has been heavy on thecation changes and growth in system performance capa- motivations of the participants; any form of associationbilities during the development span of the program. can constructively motivate the parties involved. The

It should be emphasized that since the development fact that this is more easily accomplished with the groupcomplexities and state-of-the-art improvements which contracting arrangement is submitted.are the goals of most future programs are so great, and There has been considerable interest expressed in con-the nation's future defense position is so much at stake, nection with certain financial, legal and contractualit is inevitable that most future weapons systems de- matters as they pertain to group contracting. Briefly,velopment programs will have to incorporate changing with regard to contract financing policies, profit con-goals and requirements within their developmental spans. siderations, procuremenit practices, and technical dataThis will be done in order to include the results of the transmission, there seems to be no particular differencelatest research findings. It puts a very great premium on relating to these matters in connection with group con-the ability to make rapid and economic incorporation of tracting than is generally experienced in military business.changes, and confirms the necessity for the continued The form and content of the contractual documents in-constructive cooperation of all parties involved. volved between parties is the dominant factor at issue.We seek to harness the reserve capabilities and co- These documents are determined by the job to be per-

operative attitude of all participants. This, in effect, formed. Also, with respect to patent problems and ques-gives accesss to a large ready reserve within the total tions involving combinations of businesses, these areframework of the team for quick assignment to particu- highly technical legal questions. While no current prob-larly specialized tasks. We seek to maintain the continued lems in this area soon to be present, this paper cannotposture of team members as proven and favored sup- presume to consider these questions generally; they arepliers to improve the amount and integrity of information specialty problems which can be resolved, and should betransmission between all parties. We seek to contin- considered with care, by legal specialists.uously increase the mutual loyalty and understanding Up to this point, group contracting has been describedbetween all participants based on their proven perform- in general. Our current program, the AN/ALD-3 Pro-ance. These attitudes continuously give rise to still more gram, is of major extent; it will require over two yearsimprovements in performance. to complete, in excess of two years to develop a qualifiedThus far group contracting operations have been com- unit, and the cost will be in excess of 18 million dollars.

pared with the conventional prime and subcontractor The program involves the development of advanced hard-relationships. Let us point out some contrasts between ware with performance capabilities not curiently avail-group contracting and other current methods: able, the initegration of this hardware into a complexWith respect to management contracting a matter system with sophisticated capabilities (involving integra-

of nomenclature must be tentatively introduced. We at tion of man and machine elements), the handling of largeHoffman are currently involved in a major electronic quantities of data and the utilization of digital computers.system development, the AN/ALD-3, also known as All the elements of the program and of the complete"Tall Tom," which is a group contracting effort. In this system must be delivered to a very firm schedule. Theprogram, we are the team leader and are, by definition, program also involves flight test activities and crewthe management contractor. This leaves a very elusive training. Hoffman Laboratories Division and seven otherbase from which we can make a comparison. Taking, for organizations compose the team which is developing thisthe moment, the definition of management contracting system.literally as the responsibility of managing a particular Now let us consider the specific advant!ages which ac-program (as is frequently done in the heakvy construction crue to the government from group contracting. Groupindustry),; and combining with this thoug;ht the relations contracting- provides better organizations sfor any givenof other-participants as "associate contractors," we can program than any other approach. This. is inherently- themake certain brief comparisons with group contracting. case because the organizations are tailored to the job. ItFirst, there is a difference in the form of contractual re- provides a team whose total capabilities for performance

74 IRE TRANSACTIONS ON ENGINEERING MANAGEMENT September

are far superior to those of any individual team member. enter the competition simply upon the receipt of a requestMore importantly, the team capability to visualize and for proposal. This continuous process allows the manage-plan the over-all system, under proper management di- ment and engineering team to profit by the lessons learnedrection, is far in excess of the "arithmetical sum" of the and to solidify their operating experience. Continuity ofcapabilities of the individual team members. For instance, effort is assured.a complex communication system may require abilities Since the team which will perform the job is composedin specific technical areas such as antennas, receivers, of the same individuals who initially defined the program,recorders, controls, ground support equipments, digital this preliminary work experience provides a trained groupcomputers and data processing subsystems, transmitters with immediate readiness to start useful work upon the(microwave cables, VHF, VLF), reliability engineering, issuance of a contract. A necessary condition of a groupradio interference engineering, human engineering, logistic arrangement are firm pre-contract agreements on thesupport, operations research, training problems, and field roles and responsibilities of all contributors. This, coupledservices and flight test, as well as the usual and specialized with the assignment of personnel and resources as indi-physical facilities required for the development of com- cated by the planning and proposal activities, defines theplex systexns. Clearly, the proper combination of all of term, "ready to go."these technical abilities is obtainable in onlv a very few The level of participation of each organization involvedorganizations presently active in this field. is such that the very best efforts of each contributor areIn addition to providing better organizations for assured. Ideas spring from individuals, and the higher the

specific tasks, the group contracting approach provides a motivation of the individual, the better the ideas. Thebroader industrial base and consequently more real in- ability of highly specialized organizations to participatedustrial competition. Clearly, the government has the in programs of national importance assures that all con-advantage of a more truly competitive situation when tributors will supply their best and most creative personnelproposals are received from a broader industrial base of for the program at issue.fully qualified contractors. The very fact of qualifying The opportunity for all organizations to be representednew groups of specialized organizations to prosecute major in the initial definition of the job and in matters of policyprograms demonstrably supports this contention. It is throughout the term of the program, assures that thepatently obvious that very few of our industry's special- motivation of all contributors will remain high through-ized organizations could ever attempt to enter the develop- out the program. The favorable climate toward all organi-ment of the larger and more complex systems on their own. zations involved maximizes the opportunity for continuousThe government is provided a maximum opportunity to "cross-fertilization" of ideas. Since all organizations

make an objective assessment of the suppliers capability. identify their progress with the total program progress inThe cooperative activity of defining the system and the this mode of contracting, all contributors are colntinu-determination of the precise assignment of work for each ously examining the program and its operation from thecontributing organization necessarily requires more and standpoint of increasing their contribution.better systems planning. This automatically results in Group contracting inherently provides large reserveproposals which have been thought through and cross- capacity in skills and facilities. The customer is auto-checked in great detail rather than the more superficial matically provided a large-scale ready reserve of personnelplanning which inevitably comes from the more limited and facilities. The relationships between individuals andperspective of a small organization. For example, a recent organizations are such as to readily permit the timelysystems proposal required 50 man-months of effort for assignment of responsible tasks to persons or groups withhighly qualified technical and management personnel. unusual skills whenever and wherever they may be needed.This effort considered many approaches before the final These advantages can only be rarely obtained within thesystem was selected. The advantages which accrued from classical frame of reference of other forms of contracting.the participation of the key members of the contributing Of course, in putting together the Tall Tom Team, weorganizations were obvious-no individual organization have encountered problems. The concept of a technicalcould begin to foresee all the problems which existed, and management team comprised of representatives ofnor many of the approaches or solutions which would various companies geographically separated, yet unitedlater be required. in joint effort on one over-all project, brings with it certain

It is fundamental to our concept of group contracting administrative and organizational complexities.that the engineering team which prepares the proposal One major problem that exists within both the over-alland does the preproposal activities of planning and system framework and the individual participant-companly, isdefinition is also the team for task accomplishment. The that of project cohesion, cooperation, and coordinationactivities of proposal, negotiation, award, and task per- of effort. This situation is aggravated by rigid time sched-formance are a continuous uninterrupted sequence of ules, the distance between co-contractors, and the slownessactivities carried forward by the same group of key tech- of inter-communications regarding tie-in developments atnical and management personnel. The very complexity of other companlies.future weapon systems is such as to positively exclude We have solved this problem of administrative com-from the ranks of the thoroughly qualified those who plexity by aggressive management action. We have

1959 Katz: An Industrial Approach to the Management of Research and Development 75

searched out "the simple way" of accomplishing our tasks Naturally, financial problem situations arise. We haveand have made it standard. Project cohesion has been resolved these areas by presentation of the facts involvedassured from the start by close contact between the actual and by intelligent management action. We have main-participants. We have eliminated many of the usual tained an attitude of fairness and firmness and have actedechelons of command which separate the working levels swiftly to prevent small problems from growing intoand tend to smother creativity. We have overcome the large ones. In this regard, we recognize that we cannotdistance and communicatioins problems by good pro- afford to have less than-the very best, and we expect tocedures and ready provision of the latest communication pay adequately for this. The increased efficiency of opera-facilities. tion gives most results per dollar.

Of course, this particular problem is not unique to As far as the future is concerned, we at Hoffman aregroup contracting-we are all familiar with the internal presently operating in this nlew management regime ofdifficulties which occur in even a single plant operation group contracting. We are expanding our horizons towardin the absence of effective management. We face the increased participation in group contracting programs notproblem of continuously keeping the motivation of all only as a team leader, but in some cases as a team member.participants at a high level. This is an intangible and is Our future role in such programs will be determineddifficult to measure. Our approach has been complete simply by the match between the job to be done and ourhonesty and candor in our relationships with our asso- capabilities at that time. Clearly, we favor this con-ciates. Potential trouble areas have been isolated and tracting method. We are convinced that it is in harmonyeliminated. So long as doing business with us provides the with the expanding and complex future needs of theopportunity to make a profit and to expand with the military establishment. Our experience is daily provingeconomy, our associates will seek to maintain their posi- that this is a practical and effective method of operation.tion with us as "favored suppliers." In this way, the long Our over-all objective is to provide our customer with aterm situation is favored over temporary or "one shot" capability he can find in no other organization-and weopportunities. intend to maintain this leadership.

An Industrial Dynamic Approach to the Managementof Research and Development*

ABRAHAM KATZt

Summary-Our intensive search for knowledge, basic and INTRODUCTIONapplied, must be accompanied by a corresponding search for theprinciples underlying the management of research and develop- N recent years, research and development has emergedment. An attempt has been made here to seek out the factors of as a major stimulant to our continuing economicmajor importance and to organize them into a meaningful whole. growth. Federal expenditures for research and de-Basic to this analysis have been the views of product value and cost velopment have tripled since 1949, and are now runningas streams in time, and of managerial capabilities as probabilities . . .of project completion, also varying in time. A simple model based well iln excess of three billion dollars. Industry spendson these concepts has been developed for a business in which the heavily of its own funds, more than matching the federalproducts are characterized by great complexity and by rapid change. investment. This means that we shall, in 1959, spendThe model is simply a tool to understanding-a way of looking at a some twenty millions per day to acquire new knowledge,business. Rational procedures have been derived for making and to apply this knowledge to the development and de-

certainoftheajorprject deisions.sign of newT products and processes. Despite this trulyfantastic effort, we have done little to acquire an under-

* Manuscript received by the PGEM, June 12, 1959. This standing of the process of managing research and de-paper stems from a thesis written in partial fulfillment of require-ments for a Master's degree at the Massachusetts Institute of velopment. Our .shallow understanding is all the moreTechnology. The thesis, entitled "An Operations Analysis of An remarkable wrhen we realize that this intensive effort isElectronic Systems Firm," was prepared while the author wasstudying under a Sloan Fellowship, sponsored by the Radio Cor- drastically altering not only our means and organizationsporation of America and by the Alfred P. Sloan, Jr. Founldation., for defense, but also those for our commercial and in-

t RCA, Defense Electronic Prods. Advanced Military ElectronicSystems, Princeton, N. J. dustrial activities.