Contract Negotiation – Good Intentions Technology and Federal Watchout Agency

Contract Negotiation – Good Intentions Technology and Federal Watchout Agency

Contract negotiation needs a critical evaluation of the risks and benefits of choosing a certain contractor to increase efficiency and business performance. While assessing the contract, it is important to involve the key players in all stages of the contract and ensure everyone is conversant with the terms and conditions of the contract. Contract officers perform price analysis based on rationality, realism, cost, and the anticipated price. Negotiating is a key element of the contract process, more so before making any agreement. Federal Watch Out Agency (FWA) and Good Intentions Technology (GIT) plan a meeting to analyze the proposed proposal for developing first-class surveillance systems. Hire our assignment writing services to save yourself tons of time and energy required for your assignment papers.

The agenda of the fact-finding meeting between FWA and GIT will touch on various topics, including;

1. The rationality of the cost
2. Technical assessment, for instance, type of labor, labor hours, and the quality of materials
3. Other things besides the price to know whether the cost is fair
4. Suggestions to achieve the procedures and cost principles of the contract
5. Cost per company, including quality, quantity, parts, and raw materials
6. The planned cost of subcontractors
7. Government fee
8. The anticipated outcome of changing the contract from FFP to CPFF agreement

Developing Pre-negotiation Objectives

Cost analysis assesses various cost elements to determine whether the price indicated in a contractor proposal is fair. It is important to use rationality to determine the fairness of the proposed price and indicate the contract value. The next objective is to identify different cost analysis methods, such as verifying and assessing costs in terms of money and labor. Also, it is important to evaluate the impact of the current practices of the offeror on future costs, assess cost elements such as the rationality of the proposed cost, and compare the suggested cost with the cost incurred in previous projects or even similar ones to ascertain whether the proposed cost aligns with the procedures of the contract and other standards. The other thing is analyzing the outcomes and reviews of other purchase programs to assess the cost of subcontract and ascertain whether the contractor has submitted a written document stating any cost needed.

Initially, the Federal Watchout Agency had settled for a Firm Fixed Proposal because the contractor is tasked with all work and is liable for any risk. Also, FFP offers a maximum incentive, thus ensuring that costs are controlled and the contractor works effectively. Further, FFP enforces insignificant administrative burdens on the contracting parties. Contrarily, because of low prices and lack of competition and after assessing the summary of the proposed cost, FWA settled for the proposal of Good Intentions Technology (Wang & Miguel, 2013). FWA is aware that a firm-fixed contract involves the contractor adopting more precautions and relatively higher prices to compensate for anything that might come up (Brodsky, 2009). Also, a fixed-price contract gives contractors fewer incentives to complete the work before the timeframe and below the quoted prices (Brodsky, 2009). Thus, from the cost summary given by GIT, in terms of developing and offering delivery of surveillance cameras, FWA needs to reduce the costs of material and labor. GIT should know that the Cost Plus Fixed Fee contract needs a certain amount of money, all the incurred reimbursable expenditures should be submitted, and the approximated costs are the only ones to be reimbursed. FWA will pay the fixed cost after the successful installation of the surveillance cameras.

Notably, in the CPFF contract, the expenses for carrying the projected amount are catered for, as well as other fixed amounts for the delivered services. With CPFF, there will be costs and acceptable expenses will be reimbursed. The CPFF will attract opportunistic behavior since the revenue will be paid promptly upon delivery of the cameras (Chong & Miguel, 2013). In addition, CPFF will enable the contracting officer to create a budget-tracking strategy to ensure the allocated budgets for the whole project go as planned (Oyer, 2011). The fixed fee is not the same; thus, there could be price negotiations.

Proposed Documentation

The contracting officer will develop the objectives of pre-negotiation. One way of implementing them is the contract award document. This is a crucial tool necessary for managing stakeholders and what they expect. The details of the contract should be established and outlined well. Also, the document should contain detailed data on all cost elements. The scope and in-depth analysis to support the negotiation objectives should be linked to currency value. The method of calculating the profit and pre-negotiation fee or negotiated fee should be in writing (FAR 15.4, 2017). The contracting officer should document all important issues requiring negotiation, the projected cost, and revenue or fee, more so if there is cost analysis.

FWA can provide data via price quotations from labor costs, local vendors, and various indirect costs. The contracting officer must know the value pattern. GIT needs to give written outcomes that support reasonable and fair cost data. The pre-negotiation goals will be reviewed and documented using departmental guidelines and principles. As such, FWA will participate in formulating the pre-negotiation goals by laying templates and formats. Importantly, the purpose of the negotiation should be known and made clear to the contracting parties.

Assumptions

Based on the presented information, it is apparent that the planned cost summary was developed on the basis of various aspects. One of the assumptions is that cost analysis was conducted on the basis of dollar value at that time. This does not necessarily mean that the planned price summary will not deviate. Any variation related to the price should be submitted after receiving the proposal. The other assumption is that FWA invited an acquisition team to conduct the cost analysis. Technical evaluations entail the assessment of different offers in terms of their costs. It consists of a detailed evaluation of qualitative and quantitative aspects that affected the planned price, although technical evaluation does not directly correlate with price. Technical assessment eases accessibility to functions, affecting cost. Subsequently, audit analysis entails offering independent planned cost evaluation and verifying what the vendor anticipates (Murphy, 2009). This includes materials, salaries, and cost aspects causing overhead rates. In such an instance, the auditor works to inform the contractors of the charges listed in the proposal.

Further, it is assumed the contractor can demand a waiver if he believes there are rare cases and has enough information to ascertain the credible and fair costs. Fair prices can be evaluated using different methods, and the goal is to determine whether the price is fair and reasonable by examining the individual components of the price. To meet the outlined objectives and guidelines, it is important to know the market price to arrive at fair prices.

References

Brodsky, R. (2009). Cost of Risk. Government Executive, V41 (8), 14-16.

Chong, W., & Miguel, J. S. (2013). Are Cost-Plus Defense Contracts (Justifiably) Out of Favor? Journal Of Governmental & Non-Profit Accounting, 2(1), 1-15. https://doi.org/10.2308/ogna-50558

FAR 15.4 (2017). Contracting Pricing. Retrieved from https://www.acquisition.gov/far/html/Subpart%2015_4.html

Murphy, J. E. (2009). Guide to Contract Pricing. Vienna, VA: Management Concepts Press.

Oyer, D. (2011). Pricing and Cost Accounting: A Handbook for Government Contractors: A Handbook for Government Contractors. Vienna, VA: Management Concepts Press.

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Good Intentions Technology (GIT) submitted a Firm Fixed Price Proposal (FFP) to the Federal Watchout Agency (FWA) in response to a Firm Fixed Price Solicitation to build 75 B1-RD type Aerial Surveillance Cameras (ASC). GIT is a world leader in surveillance systems and has delivered over 750 of the B1 series cameras. The ASCs must be delivered no later than 24 months after receipt of the order.

Good Intentions Technology and Federal Watchout Agency

After a series of questions, information exchange, and clarification requests, GIT and the FWA have agreed to meet in a formal fact-finding session at an undisclosed location.  GIT responded to the FWA RFP with the Cost Summary Detail provided below and is interested in a Cost Plus Fixed Fee (CPFF) arrangement.  GIT’s Program Management asserts that a cost-type effort may be better suited for delivering the FWA requirements than the Firm’s Fixed Price.

Your task in Paper 2 is to provide preparation documentation to support face-to-face meetings between GIT and the FWA.  You must develop a simple fact-finding meeting agenda, which includes the pre-negotiation objectives that you expect to accomplish.  Additionally, you must explain how you plan to document the structure of your future negotiation settlement, assuming that the FWA accepts the GIT Proposal, with no further discussion.

The Paper content should include framing and documenting each one of the following points, for which you may take either the FWA or GIT perspective:

• High-level Fact-finding Meeting Agenda between GIT and FWA.
• Development of Pre-negotiation Objectives with explicit emphasis on cost analysis techniques that can be considered in evaluating the proposed direct labor, materials, and ODCs.
• Proposed Documentation for a negotiated settlement with objective support.
• Any Assumptions, such as regulatory, statutory, or operating guidelines used to accomplish the given specifications, in your Paper.
• Appropriate writing mechanics, formatting, and sources.