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Contract Pricing and Negotiations
Added on -2019-09-21
This article discusses the three seller pricing strategies, three types of contract types, small business program managed by the federal government, price factors, and more. It also explains the roles and challenges of the contracting officer’s representative (COR) and the importance of debriefing unsuccessful offerors. The article concludes with a discussion on the use of taxpayer money for financing government contractors.
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CONTRACT PRICING ANDNEGOTIATIONSNameSubmitted toDate
Answer 1- The three seller pricing strategies are Cost-Plus (Penetration) Pricing, Demand (Skimming) Pricing, and Buy-In strategy pricing respectively. The Cost-Plus (Penetration) Pricing discusses the most rational way which needs to be adopted in determining a minimum acceptable price of a product. Cost-Plus (Penetration) Pricing strategyis applicable under apparently low-profit margins market conditions. The strategy strongly discourages would-be competitors from making entry into the market under low-profit margins condition (Li et al., 2015).The Demand (Skimming) Pricing focuses on economic theory, which describes the concept of the industry and Finn’s demand curves. Demand (Skimming) Pricing approach assists firms who are interested in introducing new technology or innovation in the marketplace. Demand (Skimming) Pricing strategy let such firms analyze the obvious risks in the prevailing competitive market conditions (Spann et al., 2014). The Buy-In strategy approach is primarily based on profit motives. The firm's resources and market conditions play a major part in ascertaining to which options can be considered to be the most appropriate one. In an attempt to assist low profiteers in determining the price of their product, buy-in strategy enables to guide them about the prevalent market condition by providinga platform which allows low profiteers to beat the competition under fairly enough low price (Aceves-Bueno et al., 2015).
Answer 2 - The three types of contract types are cost reimbursement contracts, fixed-price contracts and unit price contracts. The cost reimbursement contract guides the buyer who is unaware of current market workflow and is thus beneficial for them in analyzing the market. Thedrawback of cost reimbursement contract is that it is a one-way channel, and since there is no limitation or boundary marked to check the activity of sellers, buyers are encountered to pay unreasonable rice of the product with their consent or awareness (Roberts et al., 2014). A fixed-price contract is beneficial for buyers as they are more likely to make a profit here. The scenario explains that in the fixed-price contract both buyers and sellers decide a certain fixed price for any products or services and once the negotiation and price fixation are done, sellers have to abide by it. The drawback of a fixed-price contract is that situation might be unfavorable for buyers if sellers start lowering the price when the project is delayed, or quality of delivered work is not met up to expectancy (Chen, 2016). Unit price contract is beneficial for sellers as they make a profit out the business based on an hourly basis, especially freelancers. The major disadvantage of unit price contract is that if project managers do not utilize their analytical skill to make contact with a right service provider,the likeness of business downfall increases (Mandell et al., 2014). Answer 3 – The substantial small business program managed by the federal government for its contracts is highly beneficial for meeting the government’s contract requirements. To support thefacts, we have taken the help of newly launched small business administration (SBA) final rule and its small business program managed by the federal government, that came to be effective on June 30, 2016, with an aim to impact both small businesses and large businesses that work in collaboration with small businesses, in an attempt to perform work on behalf of federal government’s contracts. The final rule and its program came into existence to increase
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