Solar Cal Case Analysis
Contracting Methods and Contract Types: Pricing Implications
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Type | Essay |
Writer Level | Masters |
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Perfect Number of Pages to Order | 5-10 Pages |
BUS315 Week 2 Solar Cal Case Analysis
Contracting Methods and Contract Types: Pricing Implications
Participants:
Sally- Intern
Dominic- CEO of Solar Cal
Luke- Head of Productions
Jake- Head of Accounting/Finance
Melissa- Head of Government Contracting
Dominic: Good morning, Sally! Welcome back! How was your first week at Solar Cal?
Sally: Well hello Dominic. . . Last week was fantastic! I can’t believe how much I learned in one week at this position.
Dominic: Great because this week you are going to be working with Melissa Mason, our Department Head for Government Contracting, to talk about contracting methods, sealed bidding, and government contract types. Please follow me!
Sally: Sounds good! Let’s go!
Dominic: Sally, I would like to introduce you to Melissa again, you met during our introduction conference last week. As I said before, you will be working with her this week on a special project involving a government contract.
Dominic: Melissa, this is Sally, you two met last week briefly.
I would like you to show Sally what you and this department do to make sure we are following all of the U.S. Environmental Protection Agency regulations for conducting business.
Melissa: I’m excited to get started Dominic! I would very much enjoy showing Sally what we do here in the Government Contracting Office.
Melissa: Sally, please follow me and let’s get started.
Melissa: So where should we start at? I think a good place to start is with the information Dominic gave you. What did Dominic cover with you?
Sally: Well, last week I spent a lot of time with Dominic as he covered a lot of what you all do here at Solar Cal.
Melissa: Great! Can you tell me a little bit about what you know about government contracting?
Sally: Sure thing! I remember when I was in school, we learned that the federal acquisition regulations have two acceptable procedures for obtaining competitive prices. I’m pretty sure the first procedure dealt with sealed bidding. I recall this is a process by which government needs are made known by a solicitation called an Invitation for Bids. I also know that sealed bidding is used when the government contracting officer decides that adequate price competition exists, and that the specification or statement of work is well enough defined to enable offers to bid on a fixed-price basis.
Melissa: That is a great start! You have properly identified one of our first procedures. We will now move on to the second procedure we may utilize. But, first do you have any questions?
Sally: I actually do have one question. I noticed that Solar Cal doesn’t really have that much competition for its products, especially inside the country, so which approach does the government use with your company?
Melissa: That is a very good question and I will explain this operation to you now. The second acceptable procedure for obtaining competitive prices is referred to as competitive proposals. This is a process by which the government needs are made known by a solicitation called a Request for Quotation or a Request for Proposals. Here at Solar Cal, we are the only company already producing the solar panel system for General Solar, the company that produces the solar panel grids for the government. As a result of this, we have already achieved a good set of cost cutting strategies on a large scale through the buying practices for the materials needed to build our systems.
Sally: That definitely adds some clarity now!
Melissa: The process doesn’t end there though! Next, my department had to see which of the five categories of contract types being used by the government. These five categories are important to identify and consist of the following:
Fixed-price contracts;
Cost-reimbursement contracts;
Incentive contracts;
Indefinite-delivery contracts; and
Time-and materials contracts.
We will look at the first two categories, thus fixed-price and cost-reimbursement contracts. The other three categories are special modifications of either fixed-price contracts or cost-reimbursement contracts. We can take a closer look at these three other categories next time you are rotating in my department.
Sally: That sounds good to me! I’m excited to explore these concepts further!
Melissa: That’s great! Let’s get started, Sally what do you know about these contract types?
Sally: Well, I know that in fixed-price contracts, the costs of performance can be predicted with great accuracy. Firm-fixed price contracts places the total cost risk on the contractor. The person who bids or proposes to a firm a fixed price to do work is guaranteeing to deliver the work to meet the requirements for that amount of money. I think that when the government accepts the offer, it is obligated to pay that amount of money and the contractor is similarly obligated to deliver or perform the work for that fixed price. Is this correct?
Melissa: You are very correct with your explanation. When determining the cost of our materials, the direct and indirect expenses for the future was something the CEO was not comfortable with.
Sally: What about cost reimbursement contracts which are almost always awarded as the result of negotiations? I know that cost-reimbursement contracts provide for payment of the contractor’s allowable incurred costs to the extent prescribed in the contract. Aren’t these contracts used when the costs of performing the contract work cannot be predicted with high accuracy at the time of signing the contract?
Melissa: That is a very excellent point and an even better question! Keep in mind that cost reimbursement contracts establish an estimate of total costs for purposes of obligating funds and stating a ceiling that the contractor must not exceed except at its own risk. This also means that the government is carrying all, or essentially all of the cost risk in a cost-reimbursement contract.
Sally: That makes a lot of sense now! I guess I knew more about these concepts than I originally thought! Melissa, what method does Solar Cal use?
Melissa: Well, it really depends on the contract. For example, if the contract calls for a fixed fee, the government must pay that fee. So, in this case Solar Cal would be using a fixed-price contract.
Sally: Thank you for sharing that with me, I can see why the identification of categories is an important task.
Melissa: I sense that you have a good foundation for the many tasks that my office does to support the company.
Let’s continue our discussion with something new.
Melissa: Sally, have you ever heard of the Simplified Acquisition Procedures?
Sally: I think I remember a little about this concept from one of my classes. Doesn’t Simplified Acquisition Procedures apply to purchases below the small purchase limitation; I recall this as being one hundred thousand dollars for all agencies?
Melissa: You are doing great! What else do you recall?
Sally: I’m pretty sure these procedures do not apply to ordering from Federal Supply Schedules or delivering orders placed against existing contracts. I also know that the small purchase and simplified purchase procedures emphasize simplicity and minimal administrative costs. I remember that oral solicitations are normally used, although very simple written quotations may be used under certain circumstances.
Melissa: Right you are! Great job Sally! Where did you attend school again? I’m shocked because most of our new employees don’t usually know nearly as much as you do.
Sally: I attended Strayer University of course!
Melissa: Wow Strayer really educates and prepares their students for successful careers! I need to look into this school and see if they offer an online program, I can enroll a couple of my employees into.
Melissa: Sally, I would now like for you to go through some interactive training materials to help build upon some key concepts from today’s lesson.
Simplified acquisitions are the procedures applied to purchases below the small purchase limitation, which is presently one hundred thousand dollars for all agencies. These procedures do not apply to ordering from Federal Supply Schedules or to delivery orders placed against existing contracts. The small purchase and simplified purchase procedures also emphasize simplicity and minimal administrative costs.
Cost reimbursement contracts are contracts that provide for payments of the contractor’s allowable incurred costs to the extent prescribed in the contract. These contracts are used when the costs of performing the contract work cannot be predicted with high accuracy at the time of signing the contract. A cost reimbursement contract also establishes an estimate of total costs for purposes of obligating funds and stating a ceiling that the contractor must not exceed except at its own risk.
Fixed-price contracts place the total cost risk on the contractor. The offer who bids or proposes a firm a fixed price to do work is guaranteeing to deliver the work to meet requirements for that amount of money.
Sealed Bidding is the activity of preparing an acquisition request that describes its needs and cites funds for the acquisition. The upcoming acquisition is publicized through distribution to prospective bidders and posted in public places. The price that was bid on by each offer becomes publicly known once the bids are opened. Sealed bidding always leads to a firm-fixed-price contract or fixed-price with economic a
Solar Cal Case Analysis
Contracting Methods and Contract Types: Pricing Implications
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