Department of Defense Small Business Contract Essay

Department of Defense Small Business Contract - Essay Example(2009). Advantages 1. The urgency for this contract is besides the delivery of the agreed merchandise, for which the contract was agreed. 2. Can also be used to rivulet unknown avowers 3. It provides for a maculation in which there is competitive bidding on the entire range 4. Management by the owner is least required 5. It provides an incentive for the avower to equip best resources Disadvantages 1) It bears a heavy risk to the contractor as s/he assumes the cost risk 2) Both the enrolment and quality of risk is heightened 3) A very complete and in-depth definition will be needed upfront 4) There will be more cost attached when changes occur than in cost-reimbursement 5) The total instrument of the bidding process is lengthened in this case Cost-reimbursement contract This is that contract whereby a given contractor is compensated for every of its acceptable costs or rather expenses to a given limit, plus an surp lus imbursement to thrive to some profit (Project Management Institute. (1987). It is a contract with a fixed price contract, whereby the contractor is issued with a negotiated sum f money irrespective of the expenses that may be incurred thereof. There are miscellaneous contracts namely the time and materials contract, the cost-reimbursement and the fixed price contracts. Each contract comes with its own per conventionance risk and/or cost for the various agencies especially the governments but the different kinds of the cost-reimbursement contracts could be employed be it in form of the award fees, incentives etc that are put in place to motivate the contractor and subsequently dispel boast and inefficiency by the given contactor (Heldman, et al, 2007). Cost-reimbursement contract make up s the said contractors acceptable costs that are incurred to such extent set by the contract but may also pay an additional fee related to the performance. Such contracts do include an estimat ed sum intended to obligate the currency and a ceiling to that said contractor which exceeds at its own risk, unless agreed on and approved by the contract personnel. This type of contract may be used in situations in which the accounting musical arrangement used by the contractor for determination of costs is easily applicable to the contract and where appropriate management at the time that the performance is underway (Schwalbe, K. (2009). Advantages 1) Its also used in a situation where there is a concern in the long term quality is quite high. 2) In this case, net cost might be lower than some fixed price contract due to the item that the contractors never inflate their prices to cover risk. 3) It has some small incentive to negotiate corners as opposed to the fixed-price contracting (Project Management Institute. (1987). Disadvantages 1. Oversight and administration is also needed in the designation of an award to be offered or any such appropriate incentive. 2. Additiona l administration and oversight is needed to ensure that its only the permissible costs are paid and that adequate general controls to costs are instituted. 3. Certainty is modified to the exact final cost (Project Management Institute. (1987). 4. The incentive provided to be efficient in itself is smaller as compared to the fixed-price contract. Advantage of the small over big companies in contracting There are a bend of mechanisms that the government has set