Federal Contracting Activities and Contract Types

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Part 1

Introduction

            Vector Cal Company is among the leading companies in the United States that provide drone navigation systems.  Vector Cal is well known for providing aircraft as well as stealth drones (Kreps, 2016). The main vision is to become a leader in drone navigation systems production, maintain good relations with its customers and maintain good organization cultures. Their main mission is to take Drone Navigation System Production to the next level by providing drones that have less impact on the environment.

            Moreover, the company has classic values that guide all its operations, the firm values fairness, honesty, innovative power ad loyalty among its employees. The company is composed of a competent professional who have the necessary qualifications and who are committed to achieving company’s missions and visions. Vector markets its products and services to the government and directly communicates with the Government. Vector faces competition from Show Me the Way Company, which deals in the same line of products and services.

Show Me the Way company overview

            Show me the way company is an organization that is making a significant difference in the Drone Navigation System Production.  The company has proved competent and provided quality products and services to its customers.  Like Vector Cal, show me the way produces Stealth drone aircraft as well as drones with significant attributes. The drones use automatic controls; have security cameras, receivers and transmitters (Kreps, 2016). The cameras and transmitters allow users to have controlled the drones.

            The company’s mission is to offer the up-to-date technologies in the drone navigation industry by providing products that are effective and efficient.  Besides, Show Me the Way vision is to create customer loyalty and be a company of choice to many people by manufacturing efficient, quality and effective products.  The staff of the company comprises of software engineers, system engineers, architectures and other employees who fall under different departments.  The company mainly targets governments that require stealth aircraft for aerial surveys, especially for military purposes.

Part 2

Recent contracts awarded to Vector Cal

            In 2016, the American government awarded vector Cal Company a contract to manufacture around hundred navigation systems for the following two years.  The contract agreements were signed in September 2016 and the government required Vector Cal Company to produce navigation systems based on their specifications. In that particular agreement, Vector Cal organization agreed to manufacture and deliver hundred navigation systems to the American Government with the specified years.

            The firm also agreed to follow navigation standards related to technology, GPS capabilities, and Design. The American government, on the other hand, agreed to pay the company the amount contracted. Similarly, there was a mutual agreement that Vector Cal was to produce 50 of the navigation systems in one year then focus on producing the remainder by September 2018. Moreover, in 2014, vector Cal was also awarded a contract that was worth $ 48, 600,000 for offering flight operations and for backup the factories. In that case, the company would be accountable to providing support to ongoing on-orbit assets, highly elliptical orbit and Geosynchronous Elliptical Orbit.

            For these particular contracts, the American Government picked Vector Cal Company for several reasons. The first reason is that the Government believed that Vector Cal was more specialized in technology when compared to other companies in the industry. Vector uses modern design standardizations and has comprehensive telecommunication infrastructure. The company further demonstrates strong experience in supporting government projects and known to fulfilling any requirements by the federal government.

Recent contracts awarded to Show Me the Way

            Like vector Cal, in September 2016, Show Me the Way Company also won a contract from the British defense department to manufacture and delivering 80 drone navigation systems. In the contract, Show Me the Way approved to deliver the navigation systems within one year. The British government agreed to pay the company the $ 40,200 if Show me the Way completes the 80 navigation systems on time. Likewise, in January 2016, the company won a contract from the American government to manufacture unmanned aerial drone systems for the Defense forces. The contract required the organization to produce unmanned aerial drone target systems that would increase efficiency within the defense force.

            Show me the way won the contacts from the British and American government for several reasons.  Show me the way company uses a pricing strategy that makes it more competitive, the company provides services at lower costs than other companies do. For that reasons, the company attracted contracts from both governments.  Nevertheless, the company uses up to date technologies in their production processes hence allowing them to satisfy their customer needs. Despite being a new company in the market, it relies on latest navigation technologies in a secure way. The company is also known to keep time and deliver superb work. The institution also incorporates effective quantitative methods that allow it to make accurate predictions. The organization also follows Buy American Requirements hence gaining the government trusts and winning their loyalty.

Part 3

Types of Contract Eligible to the Companies

            The two companies are eligible to various contract types that vary with the cost of performance and nature of profit incentive. In this case, contacts types include cost-reimbursement contracts and fixed- price contracts. Fixed–price contracts always offer for a firm price or in proper cases offer an amendable price (Kate, 2011). Firm-fixed-price and fixed-price with economic price adjustment contracts are the types of fixed –price contracts. Cost-reimbursement contracts, on the other hand, are those contracts that offer payment for incurred costs to the extent that was prescribed in the initial contracts. Such types of contracts establish the estimated total cost of the project for the purposes of obtaining funds as well as establishing a ceiling that a contractor cannot exceed.

            Vector Cal Company qualifies for the fixed-price contract since the company uses qualitative forecasting which only relies on individual judgments rather than statistical data and numbers. The method of forecasting does not allow the company to make a future forecast about market changes (Kate, 2011). Moreover, accounting systems used by vector Cal do not permit the company to perform a timely assessment of all cost data.  The inadequacy of vector Cal accounting system makes Fixed-price contracts suitable. On the contrary, Show Me the Way Company is eligible for cost-reimbursement contracts since it uses quantitative approaches in forecasting.

            Kjaer, (2014) argued that quantitative forecasting is a better method of forecasting and allows a company to make future assumptions about costs and benefits that it can generate from a project. By utilizing time series and cross-sectional forecasting, Show me the way company can predict changes that can occur in the market. Consequently, the company qualifies for this type of contract as allows for modification in contract prices that may arise due to variations in market conditions and consumer price index, through the forecasting, the government auditor can assess concrete information about the company as well as obtaining a real budget he can present to his supervisors for contract approval.

Part 4

Direct costs and indirect costs

            Developing drone and drone navigation system involves a lot of work and may cost companies. Vector Cal and Show Me the Way Companies incur the direct cost and indirect costs, which are associated with the production and delivering of navigation systems. Direct costs refer to costs that are incurred in the production of a service and they can be either variable or fixed (Kjaer, 2014).  Conversely, indirect costs that those costs that cannot be directly linked to certain activities, events.

Direct Costs

            During the production of navigation systems, both vector Cal and show me incurred direct material and labor costs.  Both companies required skilled and competent workers in the production process.  Producing navigation systems is quite complex and the companies need highly trained workers.  Individuals who were directly engaged in the production process include engineers, technicians, cutters, welders and production supervisors. Nevertheless, since vector Cal was already well established in the Industry, it spends less on recruiting and training new employees (Kjaer, 2014). Show Me the Way had to recruit new programmers, engineers, and supervisors who would directly help in production processes.

            The two companies also incurred direct material costs. Materials are the basic element in producing finished products, consequently the Vector Cal and Show Me the Way raw materials that were important in designing drones. Moreover, they invested and purchased frameworks and applications that would help in designing drone navigation systems.  Show Me the Way Company, however, had to spend more on purchasing soft wares and applications, as it was still new in the industry.

Indirect Costs

            Indirect costs for both companies include indirect labor. Indirect labor makes the production of navigation systems possible but not assigned to the production process. An example of indirect labor costs incurred include costs on clerical assistants who support both the companies,  an employee in administrative areas such as human resource, marketers, accountant and other people indirectly related to navigation system production.

            Similarly, the two companies needed maintenance and depreciation costs, which would help in monitoring the systems. Such costs fall under equipment maintenance costs. Show Me the Way company, however, needed minimal maintenance and depreciation cost as it had modern systems that utilize the latest technology and they were already working hence reducing the likelihood of making mistakes and repetitions (Kjaer, 2014). Besides, indirect material cost for Show Me the Way and vector Cal companies included items like bolts and nuts. Both companies incurred semi-variable costs but Vector Cal Company spent more incurred semi-variable costs like water, electricity, and storage, which are vital in Drone Navigation System production due to its large size.

How costs data helps in deciding the eligible company

            Cost analysis is important when selecting the best company to win a contract. In the absence of price analysis, cost analysis helps in determining the type of contract. Direct and indirect that obtained from Show ME the Way and vector Cal would be significant in determining the best company that is fit for the Drone Navigation System contract. Before selecting the best option, an auditor will first need to assess the types of costs each company incurs (Kate, 2011). I many cases, the company with least expenses have a higher chance of winning contracts. Through cost analysis, an auditor is also able to know the undeviating cost and indirect cost that each company incurs and guide them in estimating the overall costing of producing a drone and drone navigation system including its installation, implementation, and maintenance.

Part 5

Company to win the contract

            Show me the Way ought to be given the government contract to produce navigation systems. Show Me the Way Company appears more competitive when compared to Vector Cal due to many reasons. To begin with, the company has a mission of using up-to-date technologies in the drone navigation industry through providing products that are effective and efficient. There is strong enough to motivate the government into awarding them the contract. Despite being new in the industry, their mission is strong enough to build confidence in the government.

            Secondly, quantitative forecasting method used by Show Me the Way helps the company in making strategies and in devising future managerial policies.  Through quantitative approaches, the company is able to forecast on future uncertainties. Their method of forecast makes Show Me the Way company a better option as opposed to Vector Cal, which only uses qualitative approaches that depend on individual judgments.

            Buy America Requirements are important in many contracts; in that case, show me the way follows the requirements required by the act, unlike Vector Cal. As a result, the department of defense department has confidence the institution is competitive enough and will provide efficient products and services.  Lastly, the small size and use of latest technologies in navigation help Show Me the Way ensure that its costs of production are low. Subsequently, they are able to produce efficient navigation systems at lower prices than Vector Cal, low prices is a factor that I think would be attractive to the government.

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