Data Analytics: An Integrated Financial Analysis Framework to Measure the Financial Health of Prospective Pakistani Defense Contractors

Abstract

Pakistan has the sixth-largest military in the world, and its armed services need a consistent and reliable supply of defense stores for daily operations. The Ministry of Defense invests billions of Pakistan rupees in acquisition programs yearly. Yet, contractor defaults result in inefficient utilization of limited financial resources, restricting the warfighter’s capabilities. To reduce the possibility of awarding contracts to contractors who may not have the financial capability, this research finds that financial analysis tools are missing in existing Pakistan defense procurement policies. This research developed an Integrated Financial Analysis Framework based on widely used financial analytical tools, including global, ratio, and multivariate analyses. The framework was applied to selected companies from the Pakistani textile industry to provide an illustration for implementation. With this framework, Pakistani defense contracting officers are equipped with the financial tools to assess the financial health of prospective contractors before awarding a contract. The framework can also be applied by the DOD/DON acquisition workforce to assess the financial health of any potential defense contractor. Ensuring defense contractors have the financial capability to perform DOD’s mission-critical contracts is important for the DOD to accomplish its warfighting mission, as well as to ensure appropriate expenditure of public funds