Importance of Fixed Price Contracts in Creating Effective, Efficient, and Accountable Acquisition Planning
A fixed contract is one which provides a price that is not subject to any variations except if such adjustments are specified in the initial contract agreement. This contract is beneficial to the parties since it has minimal administrative burden because the charges remain unchanged. The Federal Acquisition Regulations (FAR) recommend for acquisition streamlining which entails the efforts made in using the resources to come up with effective and efficient systems of acquisition planning. This includes ensuring use of cost effective methods in creating the design or in redesigning the existing systems. In this regard the fixed price contracts become important in ensuring an effective, efficient and accountable acquisition planning because of its benefit of minimal charges which are unchanging in the entire contract. The cost effectiveness of fixed price contracts is their important aspect in creating a better acquisition plan (Battershell, 2009).
Importance of Cost Reimbursement Contracts in Creating Effective, Efficient, and Accountable Acquisition Planning
A cost reimbursement contract is one which an agreed amount of the set price is paid to the contractor plus an additional payment to allow for returns. This type of contract is advantageous to both parties because the contractor shifts any risks to the client in the form of the extra cost, while to the client the final amount paid for the contract maybe cheaper compared to other forms of contract agreement. This contract is important in acquisition planning because it covers for all risks and the performance costs involved on the side of the contractors and also gives them a high incentive to ensure that a sound and effective acquisition plan is developed. In dealing with acquisition plans that are highly uncertain in their outcome, this type of contract becomes very useful since the contractor will always aim for maximum performance without worrying about the uncertainties involved. This leads to the creation of an effective and efficient acquisition plan.
Importance of Time and Materials Contracts in Creating Effective, Efficient, and Accountable Acquisition Planning.
Time and material contracts are those in which the client agrees to pay the contractor for the amount of work done and also for the materials used plus some mark up amount made by the contractor. This contract helps clients to achieve results for a sensible cost where the required quantity of materials cannot be estimated precisely in advance (Chinworth, 2000). Time and materials contracts may be very important where clients anticipate recurring requirement needs of different projects. This recurring needs act like barriers and may pose as a challenge to the progress of such work. However, this type of contract eliminates such barriers because the contactor supplies the requirements of the projects ensuring continued creation of effective and accountable acquisition plans.
Importance of Cost- Plus Contracts in Creating Effective, Efficient, and Accountable Acquisition Planning
The Cost Plus Contract is similar to the cost reimbursement contract in which the contractor is paid an agreed fixed amount of money plus some extra cost at the end of the work based on the total allowable costs of performance involved. This contract specifies the allowable costs, the performance costs, the maximum and minimum costs and also the price change formula to be applied. The price adjustment provides an incentive to the contractor to effectively manage the job given and this leads to improved performance. Due to the fact that this contract gives technical and performance incentives to the contractors and also specifies the price adjustments formula, it becomes a better way of improving the contractors’ performance, therefore ensuring an effective and efficient acquisition plan (Frost, 2000).
The legal framework of the federal procurement process consists of laid down statutes and acts which include the small business act, the federal acquisition streamlining act, the competition in contracting act and the information technology management reform. The administrative framework of the procurement process is comprised of some organizational laws that include the managerial orders. The FAR is a single regulatory body that applies to most high ranked agencies. The sub clause 16.1 of the Federal Acquisition Regulation describes that contracting is done on the basis of time and also the responsibilities assumed by the contractors. This is determined by the amount of incentives pegged on the performance of the contractors (Frost, 2000). Dispute resolutions in contract agreements are done by ensuring that the initial procedures are followed where the party that does not adhere to those set laws is taken through a lawful process to ensure that peace prevails in such engagements. There are various types of contracts with the main ones being the Fixed price contract and the cost reimbursement contract which differ in the fact that the former involves only a fixed price while the latter has a set price plus some extra cost which is adjustable on finalizing the contract. Cost reimbursement contracts include cost incentive contract and cost sharing contract among others.
References
Battershell, A. L. (2009). The DoD C-17 versus the Boeing 777: A Comparison of Acquisition
and Development. Washington, DC: National Defense University.
Chinworth, M. W. (2000). Acquisition Reform in the United States: Assessing Change, Defense
Analysis.
Frost, B. (2000). Measuring Performance. Dallas, TX: Measurement International.
