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‘Aqua refiners’ provides services such as specialty coating to business institutions and government agencies. Recently, the company submitted a bid proposal to the Navy to be considered in a contract to deliver services. Federal Acquisition Regulation was established to regulate procedures of acquiring goods and services through contractors. It is run by the government and it also ensures hiring of contractors who have a track record of successful past performance (Abbink, Irlenbusch, & Renner, 2000). This practice is common in executive government agencies such as the Navy and large business organizations. The system aims at ensuring the customer acquires total satisfaction in terms of cost, quality and timeliness of delivering services. It selects contractors that can deliver high quality services at a favorable price.
Two reasons why your business would qualify under the basic concepts of the HUBZone Set-Aside Procedures
Aqua refiner is likely to be considered for the contract for the following reasons: the company has a constitution that dictates the quality of goods to be delivered, the urgency of delivery as well as a cost negotiation plan. This constitution should not be defiled by any party. In fact, any employee who neglects the terms in the constitution faces suspension. Therefore, the Navy will be assured of quality services and loyalty. Aqua has previously delivered in it contracts with other government agencies such as the tourism sector and top private organizations. As a fact, the transport sector just renewed a five-year contract with Aqua where it has been delivering materials for railway construction. Through this, workers have gained proficiency in their areas of expertise which will be of great benefit to the Navy. The workers have also familiarized themselves with government contracts hence the risks are limited.
The primary ways in which a multiyear contract would benefit both the Navy and the business
Aqua refiners submitted a bid for multi-year contract with the Navy. A multi-year contract is a contract for a period of more than one year but should not exceed five years. The contract will be of benefit to both the company and the Navy. The multi-year contract will benefit the Navy in terms of budget stability by eliminating the cost arising from re-tendering, re-negotiation hence reducing the cost. Multi-year contract will make inflation adjustment for the Navy easier since the agreement with the contractor will result to annual price adjustment according to the rate of inflation. The navy will benefit from increased efficiency as the suppliers will have a better understanding of the market after long-term service delivery (Legrenzi, Politzer, & Girotto, 1996). Through a multi-year contract, both the supplier and the navy will benefit from supply chain mitigation. By understanding of each other’s needs, both parties will look for areas of consolidation hence reducing the number of suppliers, hence cutting the cost of operation. For Aqua, a multi-annual contract will strengthen the relationship with the Navy hence it will be considered for future contracts. The workers will also gain sufficient expertise which will improve the service delivery to other vendors. Multi-year contracts ensures proper time management by the contractor as it saves time spent looking for new vendors, undergoing vetting and negotiations.
Determine whether your bid proposal should be based on a fixed-price, a cost-reimbursement, or a time-and-materials type of contract
Aqua wants the project procurement to be a time and material contract since the Navy does not have a well-defined scope of work and Aqua offers a variety of services which the Navy might be interested in. the risk is shared by both parties as there is an agreement on cost sharing.
Determine the category of incentives that you are willing to offer
As an incentive, there will be negotiation in labor rate, where there will be discounted labor rates aiming at reducing the project cost, and negotiating material mark-up. In addition, there will be an agreement of a price range beyond which the contractor won’t charge; this step will ensure increased contractor’s efficiency and eliminate fear of over pricing. This will work in favor of the Navy. Both parties could agree on a labor hour maximum that the contractor should never exceed. If exceeded, there will be no compensation received from the buying party. It ensures contractors utilize the agreed working-hours hence promoting efficiency. This will also work in favor of the Navy. Exemplary performance such as observing delivery deadlines, and proper technical performance will attract incentives which will be offered in monetary form. As an incentive too, the contractor will accept deduction in payments for instances of no acceptable performance or non-performance.
Determine whether your bid proposal should be a technical, management, or cost proposal. Provide a rationale for your response
Aqua presented a management bid proposal. The proposal defines the services to be provided, the terms of provision and explains the approaches and plans formulated to address them.
Speculate on five (5) potential risk factors that you will need to consider if your company is awarded the contract
If awarded the contract, there are several risks that Aqua will need to consider to ensure proper delivery of services. There will be the need to hire a risk assessment officer to help analyze the contract. The management of these risks will determine the success of the contract.
Poor drafting and incapacity
Contracts might fail to address all issues that might arise from the contractual relationship and this might cause disputes in future. This could be intentional or by mistake. The validity of a contract depends on the capacity of the parties to sign the contract. The contractor should verify that the agent that signs the contract is authorized to do so; this ensures the contract is legal and valid.
There is a need to periodically review contracts to check the content and clauses included. The review should aim at ensuring the scope of work and compensation is clearly defined, as well as the procedures of dispute resolution. Additionally, the review should check for clauses that determine the process of termination as well as the rights of the contractor in the contract relationship. During the review, the contractor should establish that the contract is legal to reduce the chances of a misunderstanding that may arise between the parties involved.
Indemnification refers to an agreement between parties in a contract to secure either of them from consequences of a risk that may occur during the contract term. There should be an agreement of the specific risks that each party is willing to accept responsibility. Sometimes the buyers may hide harmful clauses within the contract agreement; hence it is necessary for the contractor to check for these clauses in a contract. The purpose of the agreement is to ensure that incase damage occurs within the contract term, the institution will be compensated back to its original state.
The contractor should review the contract to ensure that the vendor provides insurance cover for the risks involved in the delivery of the contract services. This aims at establishing financial stability of the buyer because most companies with a stable insurance cover is a reflection of their financial security and stability. It also boosts the confidence of the contractor by being aware that they are covered in case of accidents or damages in their line of duty. (Gransberg, 1997). The amounts of premiums in the insurance covers should be relevant to the risks involved in the services provided by the contractors. Higher premiums should be paid for most risks likely to happen.
Limitations of Liability
After getting a contract, contractors should always check the extent of limitations of liability. Many vendors include this clause that limits the amount of responsibility they bear in the event that a claim such as a law suit is made against them. Often, vendors tend to shift the exposure to the contractors and that is why the clause is mostly hidden within the contract to limit the chances of the contractors coming across the clause. Incidences such as death or body injury should not be included in the liability limitation cap. Contractors should not check to completely eliminate the liability limitation clause, instead they should ensure the liability is shared fairly or it’s minimal on the side of the contractor (Dobkin & Dempsey, 1984). A good contract should contain an agreement between contracting parties on the terms of sharing liability. The contractors should review the contract to establish the burden of liability involved.
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Going by the research conducted by Aqua refiners about the Navy, we hope to have a smooth contractual relationship. The research shows that the Navy has a strong legal team that takes care of legal affairs as well as those of its employees and contractors. It also shows that the Navy has an impressive book-keeping system that ensures prompt paying of contractors hence the risk of bad debt is unexpected. In addition, research has established that Navy has a broad insurance cover that covers risks likely to be faced by contractors. Aqua refiners also hope to earn the rewards that Navy awards contractors who perform excellently. The Navy has an incentive plan where they give monetary tokens on top of the agreed amount to contractors who deliver excellent services. We hope to be the contractor that Navy would wish to retain for all the future contracts. Hence, if awarded the contract, we will deliver excellent services.
- Abbink, K., Irlenbusch, B., & Renner, E. (2000). The moonlighting game: An experimental study on reciprocity and retribution. Journal of Economic Behavior & Organization,42(2), 265-277.
- Dobkin, J. A., & Dempsey, J. X. (1984). Protection of Corporate Secrets in Government Contract Proposals and Bids. Public Contract Law Journal, 46-59.
- Gransberg, D. D. (1997). Evaluating best value contract proposals. AACE International Transactions, 60.
- Legrenzi, P., Politzer, G., & Girotto, V. (1996). Contract proposals: A sketch of a grammar. Theory & Psychology,6(2), 247-265.