8). The federal government's recent decision to shift to fixed-price contracts is intended to protect the government from overcharging by contractors and from assuming the potentially enormous losses that are involved when projects, especially high-tech defense initiatives, fail. As Erwin points out, though, "The policy ignores history. This is a shortsighted move that only creates incentives for contractors to bid low and after winning, try to maximize changes in the program as technology or threats evolve" (Erwin, 2010, p. 8).
Another contract type (neither fixed-price nor cost-reimbursement) and an explanation concerning its pros and cons from the perspective of the federal government
Cost-plus pricing contracts can be used to avoid the uncertainty and vagaries that are involved in fixed-price and cost-reimbursement contracts. Cost-plus pricing in a negotiated contract that contains elements of both fixed-price contracts as well as cost-reimbursement contracts (Weber, 2001). In this regard, Weber reports that, "Even most fixed-price defense contracts come with price adjustment mechanisms -- such as change proposals -- that allow principals and agents room to redefine the project specifications and adjust for additional compensation. Because prices are negotiated, not set by the market, there are additional incentives for contractor opportunism. Negotiated contracts give the contractor few reasons to control costs, and they require that both parties devote more resources to monitoring and oversight" (p. 50).
Cost-plus pricing contracts are designed to compel contractors to invest in defense-specific assets to the ultimate benefit of the federal government (Weber 2001). This aspect of cost-plus contracts has serious disadvantages for major defense contractors. For example, according to Weber (2001), "Defense products are built to exacting engineering specifications with specialized equipment, facilities, and labor. Contractors must install expensive equipment and train labor to compete successfully for contracts that they...
(Vancketta, 1999) The 'Changes' clause enables the Government "to make unilateral changes to the contract during performance, so long as those changes fall within the contract's scope." The Standard 'Changes' clause utilized in fixes price supply contracts allows the CO to make changes in writing to: 1) the drawings, designs, or specifications when the item is being specifically manufactured for the government; 2) the method of shipment or packing; or 3) the place
GD Contract Federal contacts play a very large and important role in the economic sectors of our society. Knowledge about these contracts can assist students in learning about the processes that occupy most of the nation's economic resources. Military spending provides the bulk of all federal government spending and most of this money is processed through contracts. The purpose of this essay is to examine General Dynamics Corporation and give an account
Acquisition of Innovative Technology and Weapon Systems Government contracting plays a critical role in the acquisition of innovative technology for different departments such as the Department of Defense (DoD). Over the past few years, DoD has enhanced its development and acquisition of innovative weapon systems to enhance its effectiveness and efficiency. However, the conventional government contracting process is characterized by challenges resulting in delays and significant costs for taxpayers. This issue
Procurement in Government Contracting The government procurement process is identified by purchase of goods and services that will be used in provision of public goods and services like transport, railway, education, health, defense etc. It is not easy to qualify as a supplier to the government bodies since it needs to comply with quality standards. However, this might not be possible for small and disable-owned businesses. In order to offer these
Labor Agreements (FAR Part 22.5): Applicable laws There are three major labor laws which affect government construction projects. The Davis Bacon Act stipulates a specific wage floor for all workers, namely that "no laborer or mechanic employed directly upon the site of the work shall receive less than the prevailing wage rates as determined by the Secretary of Labor" for that particular area ("Subpart 22.4: Labor Standards for Contracts Involving
Federal Contracts There are several kinds of contracts that are commonly used at the federal level, including fixed-price and cost-reimbursement contracts. In order to understand them more clearly, and in order to compare them with other contracts, it is important to discuss them thoroughly. Fixed-price contracts are exactly what their name implies. They are set up based on a fixed and agreed-upon price, and that price cannot be changed (Barnett, 2003).
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