Contract Evaluation

A contract is in itself a binding agreement between two parties. In most cases, there is a binding document that is normally signed to keep the agreed parties on their obligatory duties. Research postulates that a contract should bear some logical elements for it to be most effective. For instance, the most effective written contract should be an offer. This is where a certain amount is agreed upon upon the completion of the contract. The consent of the party taking the contract that shows that the party has agreed to take a given contract should also annotate a contract. Time frames of the contract should also be specified. Finally, the terms and conditions of a contract should be meticulously indicated to qualify its enforcement. Ideally, a party that violates the agreed terms and fails to meet the obligatory duties is said to have breached the contract. The other part may suffer serious economic losses as a result of the other sluggish party. Therefore, it is worth noting to critically narrow down by evaluating the various aspects of the fixed-price contracts and the reimbursement contracts. In addition, much shall be a comparative discussion on the other elements that can contribute to a meaningful contract in terms of its drawbacks and advantages.

Comparing and Contrasting the Fixed-Price Contract and the Cost-reimbursement

A fixed-price contract is an event where the payment made on the contract is not determined by the nature of resources spent and the time utilized. It is a fixed cost in which it is used to cushion the government contractor against losses and control the cost. Because of its fixed nature, it is the most appropriate type of contract especially when the contract is done to minimize the cost of operation and maximizing profits. While on the other hand, Cost reimbursement is a situation where a contractor is enumerated based on the allocated allowance within a specified limit of amount. More often than not, this type of contract depends on the contractor’s ability to effectively complete the signed contract according to their client’s terms and conditions ("403 forbidden," n.d.) . Under this contract, an additional amount of money is coupled with the set limit of money to allow the realization of the intended profit. In a comparative evaluation of the two contracts in terms of the advantages, both types of contracts are beneficial in the sense that they allow the quality completion of the project within the specified period. For instance, with the cost-reimbursement contract, the estimation and the calculation of the expenses are left in the hands of the contractor, thus it greatly helps the contractor to maximize the quality of a given project. The contractor is dedicated to knowing that whatever the expenses incurred will be compensated plus an additional amount on top, to enable the contractor to realize their profits. Similarly, the fixed-price contract is much flexible in that, a control ensures the quality of the project basing on the fixed payment plans. Therefore the two types of contracts are motivational in themselves as the contractor performed their obligation with an assurance of their profit.

In addition, both types of contracts enable the timely completion of the job in question without consideration of unforeseen factors like the cost of maintenance. For the case of the cost-reimbursement contract, a contractor is aware and has enough conviction that, regardless of any prevalent unforeseen challenge, there is an assurance of profit. On the same note, in the price fixed contract, a contractor tries as much as he can to minimize the expenses and maximize the profit because of the awareness of the awaiting package. Therefore, in both of the contracts, it is minimal chances that the contractor can breach the contract because of the clarity of the specification in terms of the contracts packages as far as the payment of the completed contracts is concerned. Moreover, in both contracts, there is a high level of accountability and transparency. For example, with the cost-reimbursement contract, the items used in the contract process are listed for the sake of accountability and transparency of the expenditure. The same criterion is applicable with the fixed price contract; a contractor itemizes the items used in order to carefully avoid overspending in the maintenance of the job concerning the fixed price in the bidding document. Thus the contractor performs their obligation in consideration of the specified amount. Furthermore, both contracts enhance flexibility in terms of decision-making. For example, in both contracts the contractors have room for change even if the project has started, in the event that there is the necessity of any change, a contractor is at liberty to carry out any change in terms of items used and the cost of maintenance(Gurewich, 2020, p.). . Finally, in both contracts the cash flow is reliable upon the completion of the job according to the contract term. The contractor in both cases is able to leverage the discounts on the contract materials. For instance, a contractor may sub-contract the job with a discount on the cost of running the contract.  This particular structure allows the contractor to save more money for them as less amount of money will be used in the cost of maintenance. On the other hand, the fixed-price contract can sometimes lead to the contractor incurring losses because of the fact that the price quotation is fixed with no extra amount for extra work and expenses. Cost price contract on the other hand can lead to the owner incurring the cost because he or she is forced to assume all the unforeseen drawbacks. These aspects may at times backfire.

 

Analysis on the Opportunities of the Small Business over Large Business

 Logically, small businesses and large businesses have various advantages over each other. Nonetheless, each business in its respective discourse has disadvantages. Therefore, comparing their flexibility in terms of their opportunities, the small businesses have the following opportunities compared to the big businesses. Small businesses have improved personalized and customized customer services, as a result, they have a high tendency to maintain and boost their customers' confidence ("Post-contract cost control," 2013, p.). Furthermore, small businesses can utilize this advantage in knowing more about their potential customers and their creditability. Also, small businesses have an opportunity for easy adaptability in terms of knowing their customers well. Business is indeed about people. It also has a high level of adaptability as far as its customers’ needs are concerned. They have a chance of bringing more customers on board thus they enjoy constant revenue increment. Finally, small business has a high level of agility and speeding in terms of service delivery. For example, in terms of contracting and bidding, a small business can be heavily trusted because of its flexibility and agility.

Elements of the Cost Reimbursement Contract

Having looked at the opportunities of the small business and the nature of the cost-reimbursement contract, it is prudent to highlight some of the elements of this contract that impact the small businesses. According to its terms, a contractor is paid an additional amount of money to enable it to make profits. This aspect may be a deterrent to the growth of the small business as the additional amount added on top of the specified amount of money is not specified in the term of the contract thus it may financially cripple the small business's economic status. Furthermore, this type of contract impels the owner to generally assume any unforeseen dangers in the contract. In this case, the contractor enjoys all the profit accruing upon the completion of the contract(Hunter & Sanders, 2021, p.). The owner is left to bear all the risks that prevail in the contract. The owner is forced to assume all the potential risks before the commencement of the contract. With the capacity of the small businesses, this condition may negatively impact the operation of any small business.

Beneficial Contract Form

Comparatively, a price fixed- contract would preferably be beneficial to my small business because of the terms of the contract. It requires that a contractor will be given a fixed amount of payment regardless of the expenses incurred and the time spent in the contract performance. Unlike other forms of contract, price–fixed contracts enable small businesses to leverage the available resources and the financial ability. In addition, this form of contract, because of its fixed and predetermined price allocation enables the small businesses to purchase the required items in place(QC & Robert, 2021, p.). Finally, a price-fixed contract can help small businesses to predetermine the entire receipts and the inventories in terms of ensuring the contract against any unforeseen circumstances.

The Most Significant Form of Contracting

It is the uttermost desire of any business company to maintain their quality of work in terms of the contract. Therefore, the most appropriate contract form for large companies like Boeing is the cost-reimbursement contract. Having comparatively evaluated the various forms of contracts, this form is the most commensurate in terms of the quality service delivery. Moreover, with the large business and the companies, they fight to maintain the constituency in terms of quality of work done. One of the most advantageous elements about this contract form is that there is an additional payment to the contractor apart from the agreed amount of money in order to ensure the contractor realizes the meaningful profits. This contractual nature motivates the contractor to optimally deliver their service commensurately according to the client’s specifications.

 The Contract Plan

As the adage goes, failing to plan is planning to fail, any contractor planning to secure a contract has an obligatory duty of coming up with comprehensive plans for their contract. Therefore the following would be my developed contract plan that I would present to the government for me to secure a contract.

Deliverables

I would prepare the compressive list of the items required in terms of favorably accomplishing the contract. The legibility and reliability in terms of awarding the contract is determined by a good plan for better budgeting.

The Contract Schedule

A given contract covers a specified period. In my contract plan, I will specify when the contract will begin, the deadlines of the contract, and the deliverable. This planning part helps in monitoring the contract process. 

Financial

This is the contract financial budget that entails the expenses to be incurred in the entire contract process. I will accompany the entire budget with the appropriate calculation concerning the finance allocation of the contract.

Work Plan

Under a work plan, I will place all the allocation of the expenses in the various expected areas in the contract performance process. This will include the deliverable size at each level of contract performance. Finally, I will ensure that I assess the proposed input and the level of output in relation to the actual input and the output in the contract performance.

Outline (Contract Evaluation)

1. Introduction

• Definition of the term contract  and broad discussion on its natures
• The section briefly introduces  the various types of contract

Comparison and contrasting of Fixed price contract and Cost Reimbursement contract

• This section compares and contrasts the two forms of contract in terms of advantages and drawbacks

Analysis of the Small Business Opportunities

• This section analyses the opportunities that a small business enjoys  over a large business

Elements of the Cost Reimbursement Contract

• This section explores the elements  of the Cost Reimbursement contract concerning small businesses

Beneficial Contract form

• The importance of the selected form of contract is broadly discussed

The Contract Plan

• It explores the contract plan that can enable me to secure a government contract

Thesis Statement

• This is the key focus of the question
• It is part of the introduction