GC 501 — Microeconomics of Procurement & Markets (14-week syllabus)
Why does the federal market behave the way it does? Why does incumbency dominate? Why do set-asides work — or not? Why is the winner's curse real in a price-only competition? This course supplies the economic theory the undergraduate tier deliberately leaves out. It is the theory spine of the degree.
Course number: GC 501 · Credits: 3 · Format: 14 weeks, one 75-minute session per week (plus reading and a weekly written deliverable). Audience: Graduate students in the MS in Capture Management & Government Business Development; adult-pro students and full-time students alike. Prerequisites: None beyond the program's foundations (or the Foundations Bridge). Recommended companion: GC 520 (organizational theory) taken in the same term; the two courses look at the same market from the market side and the firm side. Texts: the doctrine and literacy folders of this repository; the course reader (seminal papers and public data exercises distributed weekly). No software required — the course is stack-agnostic by design (doctrine/08).
Learning outcomes
By the end of this course, a student can:
- Explain the federal market as an economic object: a single dominant buyer (monopsony) purchasing differentiated goods under rules designed to create a fair, competitive process.
- Use transaction-cost economics to explain why the government buys some things as contracts and others as grants, and why some work is kept inside the firm and some is purchased.
- Apply auction theory to predict bidder behavior — and to explain the winner's curse in LPTA competitions and why best-value procurement exists.
- Analyze the economics of set-asides and small-business programs as deliberate market design, and evaluate their efficiency and equity trade-offs.
- Read a firm's cost structure as an economist: fixed vs. variable cost, economies of scale and scope, and the cost floor beneath any price.
- Explain how contract type allocates risk and incentive between buyer and seller — and why the same work can be a different business under FFP than under CPFF.
- Use public procurement data (awards, forecasts, competitor records) to support an economic argument about a market, a segment, or a pursuit.
- Draw the economics of a pursuit portfolio: how a pipeline of pursuits behaves as a portfolio of real options under a capacity constraint.
Weekly schedule
| Week | Theme | In-session (75 min) | Reading / material | Assignment due next week |
|---|---|---|---|---|
| 1 | The market as an economic object | The federal market at a glance: one buyer, many sellers, published rules. Monopsony, the appropriation constraint, and what "the customer" means to an economist. | doctrine/01; literacy/where-the-money-flows | Write a one-page economic map of one agency market: who buys, what they buy, who competes. |
| 2 | Why government buys: public goods and the demand side | Public goods, externalities, and the missions that justify spending. Why the buyer's "utility function" is a statute, not a preference. | doctrine/01; the course reader on public economics | One-page memo: what public purpose does your chosen agency's spending serve, and how does that shape what it buys? |
| 3 | Markets vs. hierarchies: transaction costs | Coase and Williamson: why some transactions happen in markets and some inside organizations. Make/buy and the boundary of the firm. | doctrine/03; the course reader on transaction-cost economics | One-page analysis: which of your firm's (or case firm's) capabilities should be kept in-house, and which purchased or teamed — on transaction-cost grounds. |
| 4 | Information and the rules: why a rulebook exists | Adverse selection and moral hazard in procurement. The FAR as an information-forcing institution: disclosure, certification, fairness. | doctrine/04; literacy/how-to-read-an-rfp | Short paper: locate three places where the FAR-like rules force information to be disclosed that a private buyer would not require, and explain the economic rationale. |
| 5 | Auctions I: the mechanics | Open vs. sealed bidding; first-price vs. second-price; reserve prices; the Vickrey insight; how federal sealed bidding maps onto auction theory. | doctrine/02; the course reader on auction theory | Worked exercise: model a sealed-bid competition and show the equilibrium bid under simple cost assumptions. |
| 6 | Auctions II: the winner's curse and best value | Common-value auctions and the winner's curse. Why LPTA rewards the most optimistic cost estimate. Best-value procurement as a multi-attribute auction. | doctrine/05; the course reader on the winner's curse | One-page analysis: identify the winner's-curse exposure in a real LPTA solicitation, and the discipline that protects against it. |
| 7 | Market design: set-asides and the small-business universe | The small-business programs as statutory market design. Efficiency vs. equity; entry effects; the cost of restricted pools. | doctrine/01; literacy/glossary (small-business section); SBA size-standards in plain language | Policy brief: evaluate one small-business program (HUBZone, 8(a), WOSB/VOSB, or set-asides generally) as market design. |
| 8 | Cost economics of the firm | Fixed vs. variable cost; economies of scale and scope; the cost curve beneath the price. The fully-burdened cost floor as the economist's supply curve for a pursuit. | doctrine/05; the course reader on cost curves | Build a simple cost-structure model for a case firm: direct cost, burden layers, the cost floor per labor category. |
| 9 | Midterm | In-class examination: apply the first eight weeks — a real (published, closed) market, a real cost structure, a real auction — to explain behavior and predict outcomes. | (review weeks 1–8) | Midterm submission. |
| 10 | Contract economics: risk and incentive | Contract type as a risk-allocation device. FFP, T&M, FFP-LoE, CPFF, CPAF, CPIF: who bears which risk, and what incentive each creates. | doctrine/05; the course reader on contract design; the margin-floor discipline at concept altitude | One-page matrix: for three contract types, who bears cost risk, who bears performance risk, and what behavior each incentivizes. |
| 11 | Industrial organization of federal contracting | Concentration, incumbent advantage, entry barriers (registrations, certifications, clearances, past performance). The economics of incumbency pressure. | doctrine/07; the course reader on industrial organization | Market-structure memo: is your chosen segment concentrated? Who holds the incumbency, and what is the economic source of its advantage? |
| 12 | Pricing behavior: floors, ceilings, and the competitive band | Price as a position. The three anchors — competitor band, customer affordability ceiling, cost-plus floor — and how strategy weights them. Why a too-low price is a business risk, not a gift. | doctrine/05; the pricing canon at concept altitude | Pricing exercise: set a price-to-win for a case pursuit, showing the competitor band, the ceiling, the floor, and the margin at target. |
| 13 | The pursuit as a portfolio of real options | A pipeline as a portfolio: capacity as the scarce resource, pursuits as options, threshold discipline as an exercise price. The economics of bid/no-bid. | doctrine/03; doctrine/05 | Portfolio memo: allocate a fixed capture-capacity budget across a set of scored opportunities; defend the allocation economically. |
| 14 | Synthesis: the economics of a pursuit organization | The whole course in one frame: a pursuit organization is an economic entity that buys information, holds options, prices risk, and converts capacity into margin. Panel defense of the portfolio memo. | (course synthesis) | Final synthesis paper: "The economics of [your] pursuit organization," 2,500 words. |
Assessment summary
- Weekly deliverables — 40%. Each is a concrete written artifact (a map, a model, a memo, a policy brief). Graded on the graduate rubric: economic correctness, use of theory, clarity, and honesty about what the evidence supports.
- Midterm — 25%. In-class, real-market examination. The trap being tested: applying the theory to an actual market rather than reciting definitions.
- Synthesis paper + defense — 25%. The final paper applies the course's full toolkit to the student's own (or the case firm's) pursuit organization. Defended in the final session.
- Participation and peer review — 10%. The discipline of prepared, honest, useful contribution.
The graduate rubric (weekly and major work)
| Criterion | Excellent | Proficient | Developing |
|---|---|---|---|
| Economic reasoning | Uses the right model, states its assumptions, and applies it correctly | Right model, minor errors in application | Model wrong or asserted without use |
| Evidence discipline | Claims are tied to public data or stated explicitly as assumptions | Most claims tied to evidence | Evidence asserted or fabricated |
| Theory use | Theory explains the case, not decorates it | Theory present but not load-bearing | No visible theory |
| Decision relevance | A reader could act on the recommendation | Readable, mostly actionable | Unusable or unfalsifiable |
Policies
- The doctrine is the course. Every assignment tests the concept, never a tool.
- Real markets, safe exercises. We analyze real published markets, awards, and solicitations — never a live competition.
- Integrity. Fabricated evidence or invented data fails the relevant assessment outright. In a course about the economics of trust, trust is the thing being graded.
- Late work. The pipeline has deadlines; so does this course. An honest early warning beats a silent late submission.
The market rewards what it rewards for a reason. This course is where you learn to read the reason.