Aerospace Drones
Aerospace Drones has completed its first contract with Department of Defense (DoD) on time and under budget. Company expansion has increased production capacity. R&D continues to set industry standards for camera stabilization systems.
You have now learned that the Department of Homeland Security (DHS) Science and Technology Directorate (S&T) is seeking to expand their UAS surveillance capabilities. These contracts will require significantly more time to prepare. Once again, you must get to work and prepare a detailed report that addresses the more advanced level of requirements needed for submission.
Instructions
Write a 6–8 page paper in which you:
1. Compare fixed-price contracts and cost-reimbursement contracts in terms of the benefits and drawbacks of each for your business.
2. Analyze at least three opportunities your small business will have compared to large businesses in general.
3. Discuss which elements of cost-reimbursement contracts tend to produce the biggest troubles for your small business. Provide a rationale for your choices.
4. Determine which form of contracting would benefit your business the most among all the forms of contracting described in Chapter 16, including reasons why.
5. Select the most significant form of contracting that would support large companies (for example, Boeing) among all the forms of contracting described in Chapter 16, including reasons for your selection.
6. Develop a plan on how your company would justify the government to award your company the contract when the form of this contracting supports larger companies.
Sample Solution
Fixed-price and cost-reimbursement contracts are guarantees made based on the expected value and risk associated with a product or service. The hallmark of fixed-price contracts is setting a fixed total price for a defined product or service. Fixed-price contractors are legally obligated to complete such contracts, and may face financial damages if they do not. In cost-reimbursement contracts, the risk burden shifts back to the project. But what do you do when specifications are less defined and may change during the project, and the risks are largely unknown? This is when project managers often turn to cost-reimbursement. Under cost-reimbursement contracts, all legitimate contract costs incurred by the contractor plus a negotiated fee for contractor profit are paid by the project.
