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A brief comparison of a Honda and an AMC plant (detailing the efficiencies of Honda and noting the old-fashioned operations at AMC) demonstrates why the Department of Defense has initiated its Industrial Modernization Incentive Program (IMIP). IMIP encourages U.S. manufacturing firms that are defense contractors to make capital investments for the improvement of productivity, which over the long term will reduce national defense expenses. The projects undertaken by the Air Force (100 industrial projects), the Navy (15 projects) and the Army (3 projects completed; no active projects) as part of IMIP are described. For the most part, IMIP projects focus on factory modernization. IBM's factory that produces PC convertibles is an ideal example of modernization; at the IBM plant, computers are built entirely by robots and the flexible manufacturing system handles work load fluctuations and design changes with ease.

In the mid-1970s, the Department of Defense began developing its Industrial Modernization Incentives Program (IMIP), based upon the Technology Modernization Program instituted by the U.S. Air Force, to stimulate private sector investment in automated manufacturing technologies and factory modernization projects. The IMIP was formalized in 1982. Under the program, the Department of Defense provides seed money to defense contractors for updating their manufacturing systems, based on the theory that such updating will eventually reduce defense hardware costs. Projects undertaken as part of IMIP include: General Dynamics' Fort Worth Division's F-16 Technology Modernization Program, begun in 1976, that involved 61 projects at a savings of half a billion dollars; a project with Simmonds Precision (a manufacturer of fuel gaging systems) that achieved 40-to-1 productivity increases through laser testing of fuel indicators; and a project with Applied Technology, still in the planning stage, that will modernize 28 manufacturing sites at a cost of $25 million, while saving the Department of Defense approximately $150 million. Inconsistencies in the administration of the IMIP are also identified and discussed, with some solutions offered.