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Contracting Methods Assignment

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Added on  2020-04-15

Contracting Methods Assignment

   Added on 2020-04-15

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Running head: COST-BASED AND PRICE-BASED DOD CONTRACTING METHODSAdvantages and Disadvantages of the Cost-Based and Price-Based Dod Contracting MethodsName of the University:Name of the Student:Authors Note:
Contracting Methods Assignment_1
1COST-BASED AND PRICE-BASED DOD CONTRACTING METHODSIntroductionThe DOD (Department of Defense) has the authority of for implementing non-traditionalmethods of contracting for adapting in a better manner within the competitive market place(Apte, 2016). Such projects focus on non-traditional contracting tools to the disposal of DODalong with their merits with an evaluation regarding the ways on which DOD might efficientlyleverage the existing and likely authorities that can prove them as a competitive buyer withinadvancing technology market (Apte, Rendon & Dixon, 2016). It is also gathered that majorcontracting methods employed by the government includes micro-purchases and basicacquisition. DOD involves direct purchases through an agency, regulatory processes and ensuressupervising contractor performance. Considering the same, the objective of this essay is toanalyze the advantages and disadvantages of cost-based contracting methods. It will also explainthe advantages and disadvantages of price-based Dod contracting methods. Through analyzingthe advantages and disadvantages of such contracting methods, practitioners within the fieldoffered first-hand awareness accounts along with non-traditional contracting experience. DiscussionAdvantages Cost-Based Contracting MethodsCost based DOD contracts offer for the payment by contracted of the contract’s actualcost along with a stipulated or agreed profit (Bastola, Findley & Woodward, 2015). For thisreason, under a cost based contract, the price of DOD contract is determined through adding thereal cost of direct material, expenses and labor along with a specified amount for covering thecontractor’s overhead costs along with an predetermined profit. Certain advantages are observed
Contracting Methods Assignment_2
2COST-BASED AND PRICE-BASED DOD CONTRACTING METHODSin case of cost-based contracting methods those are explained. In this type of contract, for thecontractor there is less risk of loss taking place from altering prices, improper anticipations aswell as underestimated quotation and all such agreed expenses are recovered (Bastola, Findley &Woodward, 2015). For the contractor there is no issue of bargaining that makes sure work ofproviding quotation is quite simplified. Advantages of such contract for the contracted considerthat contract is settled at a reasonable cost and there is no bargaining problem which saves time.Moreover, the contracted also attains the advantages of the price drops of labor and material. Cost based DOD contracting methods are entered into, in consideration to severaladvantages. This contracting method is implemented in case it is not possible to anticipate itscost with great accuracy because of unstable prices while the contract is carried out or when it isspread over longer time and materials prices, labor rates and many other factors those aredeemed to fluctuate (Bhatia, 2016). These contracts are deemed to be advantageous in casewhere it offers an emergency and less time in contract price negotiation and in such situation thework is highly vital than cost. Cost based DOD contracting methods are consideredadvantageous in case a contract involves a government department (Bastola, Findley &Woodward, 2015). In this case cost based DOD contracts are beneficial both to the contractedalong with the contractor as neither of these parties are ready to lose and a fair price is providedby contracted along with that a reasonable profit is attained by the contractor (Dixon, Apte &Rendon, 2015). One of the major advantages of employing cost based contracts is that it has a tendency toresult in superior quality project. Contractors are not needed to cut corners due to the reason thatthey realize they might be paid for every expenses which they incur cost based profit (Gera &Maddox, 2013). In certain instances, final costs associated with such projects will be less in
Contracting Methods Assignment_3
3COST-BASED AND PRICE-BASED DOD CONTRACTING METHODScomparison to a bidding model as the contractor does not have to encompass certain additionalprotection for safeguarding themselves. Disadvantages of Cost-Based Contracting MethodsCost based contracting methods might also present certain disadvantages for the contractorand the contracted those are explained. Benefits on the consideration of favorable market priceare deprived. The earned profit is deemed to be low and the records along with books aremaintained in a confidential manner (Janjevic & Ndiaye, 2016). Another disadvantage is thatprofit is generally relied on cost percentage along with an effective working which decreases costand will not attain any advantage. In addition, price of the final contract remains uncertain andwith the budget it is difficult to decide the budget cost. It is also evidenced that contractor mightdeliberately experience increased prime cost for increasing the profit. The major disadvantage of this DOD contract is that there is a potential for certain disputesregarding the items that are costs and the costs those are calculated (Kani, 2014). It is deemed tobe vital that there must be a comprehensive contract which takes into account all contingenciesand explains in great detail all the costs for calculating indirect costs. Major issue that can befaced by the buyers of a cost based DOD contract is uncertainty associated with fixed cost. Themanner in which price that exceeds the budget can be avoided that considers incorporating aclause within the contract which increases total cost based features within the project thatsafeguards buyer from surprise once the contract ends (Lene & Poppler, 2014). Another major disadvantage of using a cost based DOD contract is that it is difficult torealize how much the cost of project will be in advance. This results in high uncertainty and if aperson is attempting to work based on a budget that can turn out to be dangerous. Such kind of
Contracting Methods Assignment_4

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