© 1980 IEEE. This paper describes the design and initial validation of a computerized decision process model simulating the operating environment, behavior and performance of defense contractors. The conceptual foundations of this research are presented in Cohen, Lewin and Morey (1979). The model employs feedback adaption and search mechanisms to simulate the internal decision making structure of defense contractors at the project, corporate and DOD levels. The objective of this research is to develop a capability to model the impact of various contract incentive schemes on the performance of DOD contractors.