government deals federal contractors are term

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8). The federal government government’s new decision to shift to fixed-price deals is intended to safeguard the government via overcharging by simply contractors and from assuming the possibly enormous losses that are included when assignments, especially high end defense endeavours, fail. Since Erwin remarks, though, “The policy neglects history. This can be a shortsighted move that only creates incentives for companies to bid low and after winning, try to maximize modifications in our program because technology or threats evolve” (Erwin, 2010, p. 8).

Another deal type (neither fixed-price nor cost-reimbursement) and an explanation relating to its pros and cons from the perspective of the authorities

Cost-plus pricing contracts can be used to avoid the uncertainness and inconsistencies that are involved in fixed-price and cost-reimbursement agreements. Cost-plus costs in a agreed contract that contains elements of equally fixed-price deals as well as cost-reimbursement contracts (Weber, 2001). Regarding this, Weber reviews that, “Even most fixed-price defense agreements come with selling price adjustment components – including change proposals – that allow principals and agents room to redefine the project specifications and modify for additional settlement. Because prices are agreed, not set by the marketplace, there are added incentives intended for contractor opportunism. Negotiated agreements give the service provider few good control costs, and they require that each party devote more resources to monitoring and oversight” (p. 50).

Cost-plus pricing legal agreements are designed to compel contractors to purchase defense-specific assets to the greatest benefit of the us government (Weber 2001). This aspect of cost-plus deals has significant disadvantages intended for major defense contractors. For instance , according to Weber (2001), “Defense products are built to exacting executive specifications with specialized gear, facilities, and labor. Technicians must install expensive products and educate labor to compete effectively for deals that they may only potentially win” (p. 50). On a last note, Diltz (1999) reports that, “Cost-plus contracts are often granted intended for procurements when the product is ill-defined, such as a adnger zone system that the technology currently would not exist to generate the system. The choice of contract type is usually at the discretion from the contracting officer” (p. 4).


The study showed that the 20 possibly even different types of government contracts which might be commonly used today can be categorized as either fixed-price or perhaps cost-reimbursement deals. The differences during these two types of contracts fundamentally relate to how risk is definitely absorbed and to what level. In the most common type, fixed-price contracts, costs are mutually agreed upon and they are not generally subject to alter. With cost-reimbursement contracts, companies are assured a profit above and beyond the costs of their materials and services. Finally, cost-plus deals contain elements of both fixed-price and cost-reimbursement contracts which have significant rewards for national contractors.


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innovative professional buyer bent about getting rock-bottom costs intends suppliers of basic supplies, but these firms can save themselves by taking up the purchasers’

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Diltz, L. D. (1999). Valuation associated with government agreement awards. Quarterly Journal of Business and Economics, 29(3), 3-5.

Erwin, S. We. (2010, February). Shift to fixed-price legal agreements: Smart reform or recipe for tragedy?

National Protection, 94(675), almost 8.

Kautz, K. (2009). The effect of charges and opportunistic

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