The Value of Intellectual Property in Government Procurement Auctions: The Case of Military Trucks in the United States After the Cold War

Abstract

The ownership of the intellectual property (IP) underlying the design of complex weapon systems has been at issue, between governments and their contractors, for over a century. In the United States, federal policy has directed repeated cycles of attention, both positive and negative, on the relative need to acquire these IP rights. Recent (2009) evidence from the US Army’s procurement of its Family of Medium Tactical Vehicles (FMTV) indicates that better prices can be obtained when governmental customers exercise these rights in competitively selecting contractors for follow-on deliveries after initial contracts expire. Less clear is whether winners will pursue limit pricing to discourage further competitions and the loss of their quasi-monopolistic franchises. A focused comparison of the FMTV program to that of the Medium Tactical Vehicle Replacement (MTVR) of the Marine Corps suggests that limit pricing is not always the case. Securing advantageous pricing over the long-term through data rights requires a credible threat to move away from sole-source, follow-on awards.