Term Paper on "Government Contracting"

Term Paper 4 pages (1181 words) Sources: 2

[EXCERPT] . . . .

Government Contracts

Federal contractors are faced with a number of alternatives concerning the type of contract they use for a given project. Different types of contracts, of course, have their respective benefits and weaknesses for any given project, though. To determine optimal contractual approaches, this paper explores the pros and cons of different types of contracts from both the contractor's perspective as well as that of the federal government. A summary of the research and important findings are presented in the conclusion.

Benefits and drawbacks of fixed-price contracts from the perspective of a contractor

There are as many as 20 different types of defense contracts currently in use, and identifying the respective risks that are associated with cost overruns allows them to be categorized into two general groups: (a) fixed price contracts and (b) cost reimbursement (Diltz, 1999). According to Diltz, "By far the most common among the fixed price formats is the firm fixed price contract. The price (award) is fixed for the duration of the contract, and it is not subject to any adjustment. These contracts are used in situations in which costs are reasonably predictable and specifications are well defined" (1999, p. 4). According to Black's Law Dictionary, in contracts, "prices are fixed when they are mutually agreed upon" (1999, p. 637). With fixed-price contracts, suppliers mutually agree to provide a certain quantity of materials and services at a preset price (Weber, 2001). Fixed-price contracts have significant benefits for contractors because they provide a firm monetary amount for the costs that are involved in a federal contract as well as eliminating much of the risk that may be involved if material prices unexpectedly increase. For instance, Abele, Elliott, O'Hara and Roegner (2002) report that, "[One] tactic is to shift risk to the supplier by using fixed-price contracts, which force it to absorb unexpected price hikes for raw materials" (p. 118).

The main drawback for fixed-price contracts from the perspective of contractors relates to the increased pressure on timely performance. In this regard, Kautz (2009) reports that, "When the suppliers work under a fixed price contract, time pressure is often a consequence. If, in contrast, a time and material contract is used, the risk moves to the customer and the price level increases with risk supplements, which reflect the risks that the suppliers perceive" (p. 25). As to potential benefits of using fixed-price contracting for the federal government, the U.S. Department of Defense director for industrial policy, Brett Lambert, emphasizes that, "Fixed-price contracting is only going to be applied in a rare number of instances when we have locked in requirements, we understand the requirements, and we know we're not going to change them'" (quoted in Erwin, 2010 at p. 8).

Benefits and drawbacks of cost-reimbursement contracts from the perspective of the federal government

The primary drawback to the federal government in using cost-reimbursement contracts is the potential for being forced to absorb any cost overruns or losses that are incurred during the duration of the contract project. For example, according to Erwin (2010), "The administration's directive to shift to fixed-price contracts [to cost-reimbursement contracts] seeks to protect the government from excessive billing by contractors and from bearing the financial brunt when projects fail" (p. 8). Conversely, though, Weber (2001) also points out that, "In cost-reimbursement contracts, contractors are paid for the costs they incur -- plus a negotiated amount of profit. This is a way of shifting the risks involved in uncertainty from the contractor to the state" (p. 50).

Discussion concerning which element(s) of… READ MORE

How to Reference "Government Contracting" Term Paper in a Bibliography

Related Term Papers:

Government Contracting Process Thesis

Government Contracting Process

The Federal Acquisition Streamlining Act (FASA) of 1994 was formulated with the intention of simplifying of the buying procedures of the government in that many competition restrictions… read more

Thesis 8 pages (2271 words) Sources: 10 Style: APA Topic: Government / Politics

---

Contracting Officer Research Paper

Contracting Officer

Integrity in business negotiations: Government contracting

Because questionable ethics have attracted such attention in the business and mainstream media, it is vital to remain above ethical reproach in… read more

Research Paper 2 pages (587 words) Sources: 2 Topic: Government / Politics

---

Outsourcing of Government Functions a US Study Term Paper

Government Outsourcing

The Outsourcing of Government Functions: a U.S. Study

Outsourcing of government functions is one of the most highly controversial practices of the 21st century. There are several prevailing… read more

Term Paper 35 pages (10988 words) Sources: 25 Style: MLA Topic: Government / Politics

---

Government Contracting and the Buy Green Revolution Term Paper

Government contracting and the "Buy Green" revolution

Government Contracting and Green Buying

The aim of this paper is to define the term 'Green buying' and link it to the Governmental… read more

Term Paper 3 pages (1081 words) Sources: 5 Style: APA Topic: Energy / Power

---

Government and Its Role and Power Essay

Government and its role and power to rule people within a specific territory are core aspect of all political philosophy. This is largely because people generally accept legitimacy claims made… read more

Essay 4 pages (1157 words) Sources: 1 Topic: Government / Politics

---

View 100+ more related papers  >>