760
Special Procedures: Product Development
764
PRODUCT DEVELOPMENT
764.1
FROM PROTOTYPE TO PRODUCTION LINE
The Prototype Design provides an intermediate step toward the ultimate
objective of an industrialized building system specifically organized for the
construction of hospitals. It has been carried in this direction as far as
possible within the scope of the systems integration program. Further
development can take place at the level of specific components and
subsystems through various kinds of manufacturer incentive programs. A
number of these were described in the Phase 1 (feasibility) study. Since
any of these methods could be applied to the Prototype Design, they are
reprinted here in full (Section 764.2).
764.2
PAYING FOR RESEARCH AND DEVELOPMENT
"By identifying the product needs and committing a potential sales volume,
it is possible to provide manufacturers with the incentive to undertake the
sizeable financial risks attendant to product innovation.
"Four basic processes which have been used to provide the incentive for
new product development are described below:
764.2.1
"The `Guaranteed Market' Approach
"The potential consumer (in this case, the Veterans Administration) would
guarantee a minimum volume of sales to the manufacturer who satisfies
performance specifications and has the best price.
"As a prerequisite, the customer must guarantee the market in advance of
research and development activity. Since research and development
usually requires from two to four years, this means that the customer is
guaranteeing a future building market some three to five years distant.
764.2.2
"Subsidized Research and Development
"A common practice for the Federal government is to contract for all or
part of the research and development effort, due to Federal regulations
which make it difficult to guarantee future markets. For example, in
weapons systems development, a prime contractor is chosen on the basis
of preliminary design/cost submissions.
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