Federal government Contracting
Federal Government contracting is a highly complex process. As compared commercial contracting contract made in the federal government are governed by the regulations and maze of statutes. Now government spends billions of dollars on the products and services. Federal Business Opportunities (FedBizOpps) is wide opportunity that acts as an entry point for the procurement. These opportunities are under the control of GSA (General Services Administration). It maintains the equilibrium between the government need for the product and services in such quantity that is beyond one’s imagination. When government feels these needs they award the contracts to corresponding entities.
These products and services may include vehicles, tools and equipment, electronics, maintenance and repair, office supplies and furniture, construction materials and services, risk management and technology consulting services, food and beverages and financial services. it is consider that the main purchasing agency from is the government is DoD (Department of Defense) for the products and services that government procure through awarding contract to various large and small businesses. DoD buys products from the government that include laboratory equipment, electronics, aircrafts accessories and components and equipment for the vehicles. In the year 2009 government made $104.2 billion budget in order to accomplish these needs successfully. While, GSA is a second largest buyer from the government that made purchases up to $66 billion within a year.
Government contractors also made subcontracts with other business in case of big orders. These subcontracts usually include Sub-Net, Small Business Administration and service providers in the industry of construction are consider to be most largest subcontractor for the product or services needs federal government (Ponder & Park, 2010).
Procurement Methods and examples
For the procurement government use various methods. The most common types that government usually uses to award these contracts are sealed bidding or competitive proposal process. Government uses this method for making most of the procurements. First of all, government made an invitation for the proposal or IFB for defining the needs that government wants to procure from the various resources. In that proposal government describe it requirements, detail of the products, technical data and pricing methods for making a contract. After that, government made a request for the proposal (RFP) in which data is evaluated for the sake of awarding the contract to the corresponding parties. From the various perspective governments evaluate the contractor and invite them to give the overview of their services. In a solicitation process official chose those contractors that offer best quality of the product or services within a reasonable amount of prices and contract established.
Federal government also awards contracts without any competition if they already satisfied with the services of certain businesses. The most form of these procurement contracts is Fixed-price contracts. In these contracts a contract is made with the firm that offer all the services at the firm prices and made adjustable whenever, there is need. Sealed bidding contracts are offer for the commercial items through fixed prices (Ponder & Park, 2010).
In the profitability methodology it is determined how the price for the goods and services at the one step earlier. There are many types of businesses that use various ways to making prices against their goods and services. However, in order to gain profitability from a contract government pays more attention to remain competitive. Such as for gaining more profitability government always offers it contracts to those who provide some special skills and innovation in their products as compared to others. In an old case of purchasing toilets seats at $200 and hammers at $300 is based upon to maintain a competitive position in the market. While, hammers are present and shipped in the normal market at the $400 (CT, 2012).
Government always pays special attention towards the cost saving while making various transactions. There are different methods that government use to save the cost are classified as are following
- Overhead cost (if seems appropriate)
- Fringe benefits of labor
- Depreciation cost
- Cost for procuring additional equipment
- Additional cost for procuring software
That is why government pays more attention for making fixed price contracts. It enables the government to able to adjust the prices if they made any contract with the business entity. Most of the contracts that are made through the sealed bidding for commercial items are fixed prices contracts. When federal government perused such contracts all the contractors are abide to pay allowable cost that exceed beyond the set cost in the contract. These contracts are not made without the agency approval that may also include maximum cost. In many cases government also use to made labor hours and time material contracts while making classification of cost. Through these contracts government accurately estimate the duration and extent to do the work on the base of material and labor cost (Ponder & Park, 2010).
Return on invest analysis
Return on invest (ROI) it is a ratio that is existed between the financial benefits and the total cost of the project. Federal government when making contracts with the contractors they use various options in order to ensure that they selected such technology that is not only cost effective but also increase their profitability for doing a process. Government analyze the projects on the base positive or negative rates of return according to the qualitative benefits that identifying during a planning process of the project. A discount factors is most important during that process that is applied to show the NPV (Net Present Value) use to determine the benefits and future cost of the project. It is very important when government evaluate various alternatives for making a contract with them. If the value of ROI is 50% is represent positive rate of return in case of less value it will be its vice versa. It means if the ROI ratio is greater than zero it will proves to be attractive for the government. While, subzero ratio always not proves to be narcosis for the project instead it demands various capabilities that required to fulfill the project more efficiently. In the business world all the functions of federal government are not generate positive ROI value. Government also required such services from these contracts that enable it to tolerate low ROI (USGS, 2009).
Government inspection clause
There are many terms and condition present while making a contract with the government. These terms and conditions are called ‘clause’. There are a large number of clauses present in the contracts that are strictly non-negotiable. Federal procurement case law provide such mandatory clauses for making a contract that can affect the policy made to acquire certain projects. In these contracts it is inevitable for the contractors to perform all the tests and inspections essential for supplying services. In the government inspection clause more emphasis laid upon the fulfillment of technical and systematic requirements that are solely specified by the government. These contracts also contain such standers on the base of which progress of the project is evaluated. During the solicitation process these inspections clause are reviewed according to types of the project.
Advantages of filling a protest
There are many advantages for fulfilling a protest while making a federal government contract. Such as any party can file a protest to make an object to the solicitation agency, can cancel the solicitation or can terminate the award contract. Interested parties can get direct economic benefit through filing a protest. They can also make demands for the promotion of compliance. It is possible through filling a protest the entire requirement may also repeated if it is according to the merit and bring any improvement in the project. Any requirement that is beyond the imagination and cannot bring any profitability or benefits to the project is omitted. Concerning parties can made a claim for their investment and wastage of time in case any misinterpretation made during the publication. (Ponder & Park, 2010).