Institutional Framework of Federal Acquisitions By Russell E. Hall Legal 440 Professor Hutter Strayer University July 16, 2012

The biggest customer in the world: The U.S. Government. The federal government spends more than $400 billion on supplies and services each year. It actually spends $465,000 on average, every 20 seconds of every business day, for a contract (Stanberry, 2009, preface). In order for a business to become part of selling to that enormous market it must first understand the laws, rules, and regulations that govern acquisitions and procurement for the federal government.
Discuss the importance of fixed price contract in creating effective, efficient, and accountable acquisition planning: Under a Fixed price Contract. FAR 16.201, the government agrees to pay a specific price (which includes the contractor’s profit) for completed work and delivered products. The fixed price contract is used for the procurement of commercial items as well as services when: * There is adequate price competition; * There is reasonable price comparisons with past purchases of the same or similar products or services made on a competitive basis are available; * Available cost or pricing information permits realistic estimates of the probable performance cost * Performance uncertainties can be identified, and reasonable estimates of their cost impact can be made.
The government prefers a fixed price contract because the liability of performing the contract is held by the contractor. And any cost overage or risk concerning the contract will be absorbed by the contractor. There are no limits on what profit the contractor may make. This is solely based on how the contractor manages his cost and if prudent will realize a higher profit.
The government uses fixed price contracts in simplified acquisitions, and the fixed price contract must be fully funded at the time of award except as permitted by law or regulation (Feldman, 2011, p. 94).
Discuss the importance of cost reimbursement contracts in creating effective, efficient, and accountable acquisition planning: For many government contracts it is almost impossible to determine, in advance, what a job will cost to complete. This is why the government prefers cost-reimbursement contracts allowed by FAR subpart 16.3. With cost-reimbursement contracts, the government reimburses the contractor for reasonable, allocable, and allowable cost it incurs under the terms and conditions of the contract. The government in reality carries the risk (Stanberry, 2009. P.256). anytime a cost-reimbursement contract is used it is solicited using negotiated procedures (FAR part 15).
A cost-reimbursement contract lays the foundation for a total cost estimate for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed except at his own risk. This call for the contracting officer stringently monitors the contractor’s performance to ensure the contract is run effectively and efficiently. If the cost of completing the contract exceeds the original agreed upon cost estimate the contractor must submit a revised cost estimate. The contracts modification (FAR part 43), will then reflexes the revised cost or is brought to an end.
Discuss the importance of time and material contracts in creating effective, efficient, and accountable acquisition planning: Time and material type contract, (FAR 16.601), are used in government contract situations where the amount or duration of work cannot be predicted. It is during the Market research phase of solicitation that the contracting officer decides what type of contract best suite the federal government. If it is determined that there is no other way to make an accurate estimate of the extent or duration of work to be performed or anticipate cost, than time and material should be used. This decision must be documented in a Determinations and Finding (D&F) stating that no other contract type would be suitable. The contract would also include a ceiling price which the contractor exceeds at his own risk (Hearn, 2011, P.112),
The T & M contract is not the best contract for the government because the contractor has no incentive to control the cost of materials or to manage the labor force effectively. Therefore surveillance by the contracting officer will be required to give reasonable assurance that efficient methods and effective cost controls are being used by the contractor.
Discuss the importance of cost-plus contracts in creating effective, efficient, and accountable acquisition planning: Cost-plus contracts fall under the heading of types of cost-reimbursement contracts (FAR 16.302). The common cost reimbursement contracts are: * Cost contracts. A cost contract is a cost reimbursement contract in which the government reimburses the contractor for allowable cost during the contract’s performance. * Cost-Sharing Contract (Far 16.303). Is when the government agrees to reimburse a contractor for a predetermined portion the allowable and allocable cost of the performance, it uses a cost sharing contract. With this type of contract the contractor agrees to absorb part of the contract cost in order to possible receive further financial benefits. The contractor receives no fees for his efforts. * Cost-Plus-Incentive-Fee contract, (FAR 16.305 & 16.405-2), is a basic cost reimbursement contract. This type of contract has a provision for a fee formula or incentive based on a 100/0 share, which is determined on allowable cost in relationship to target cost. This formula determines the fee to be paid the contractor after the performance of the contract. * Cost-Plus- Award-Fee (FAR 16.305 & 16.405-2), this type of contract is with special fees. It provides a mean for applying incentives in a cost-plus contract. This contract falls under two criterions, one is the base fee which is set at the beginning of the contract, and the second is the award fee, which is paid in addition to the base fee. This fee is designed to provide motivation for excellence in contract performance in the form of quality, timeliness, ingenuity, and cost effectiveness * Cost- Plus -Fixed Fee (FAR 16.306), provides a payment of a fixed fee for contractor. The fixed fee once negotiated does not change, unless there are changes in the contract itself. This type of contract is the most common of the cost- reimbursement contract.
It seems none of the cost reimbursement contracts are of great benefit to the government, accept when there is no other alternative, and the government is put into an administrative cost monitoring position

References 1. Contract Attorneys Desk Book, volume I, 2011 2. Feldman, Steven, Government Contract Guidebook, 2011, fourth edition, West a Thomas Reuters business. 3. Hearn, Emmett, Federal Acquisition and Contract Management, 2011, 7th edition,1270 Covington Road, Los Alto, California 95024 4. Stanberry, Scott, Federal Contracting Made Easy, 2009, 3rd Edition, 8230 Leesburg Pike, Suite 800,Vienna, Virginia 22182