«Federal Contracting Activities and Contract Types» - Free Essay Paper

Federal Contracting Activities and Contract Types

History Overview

The government contract that Defense Department is planning to issue suggests investing $400, 000 to the company specialized in drone navigation technologies; two companies to be analyzed here showed interest in the contract. These companies include The Boeing and General Atomics. The companies have been tested and it is clear that their technologies in drone navigation can well meet the standards and specifications required by Defense Department. Justification for this can be established in their historical background on application of this kind of technology.

History of the Boeing

Boeing is the largest company in the world that deals with structuring production of commercial and military aircrafts. The company is in control of over half of jet crafts, helicopters, space technology, military jets and missile systems in the world market. It was founded in 1916 when its founders William Boeing and his counterpart Navy engineer Conrad Westvelt established the pacific aero products company. This was in Seattle, and it resulted to their building of the first seaplane (B&W).

The company got renamed to the current name Boeing Airplane Company a year later when Westvelt was sent to active service in the army to take part in the World War I. The company’s contract with the Navy was a major factor for its growth as it was major manufacturer of planes for the Navy during World War I. The company was also the first to exploit an airline; this took place in 1919 with the establishment of International Postal. In 1927, it was contracted by U.S MAIL to distribute mails in a number of states in America. It also first built its first commercial airplane in this same year. That was the model 40.

In 1929, it formed a meager with engine manufactures Pratt and Whitney and founded the United Aircraft and Transport Corporation. Later in 1931, they renamed it to United Air Lines, but unfortunately, in 1934 the federal antitrust action forced the split of the entity into united airline, Pratt and Whitney and Boeing Company. During the First World War, the company produced war machines like the B-17 Flying Fortress, the B-29 Bomber, and the Enola Gay that carried the first atomic bomb to Hiroshima, and later the B-52 Bomber. Thereafter, the company has greatly advanced in its manufacturing technology, for instance, in 1961 it diversified its activities into manufacturing rocket which was the enormous Saturn rocket.

History of General Atomic

This is a defense contractor with its headquarters in San Diego California; it was founded on 18 July in 1955 as the General Atomic division of General Dynamic. In 1967, it was vended to Gulf Oil hence the entity was renamed to Gulf General Atomic. Nevertheless, later on it was named General Atomic Company, due to its collaboration with the Royal, Dutch Shell. It also finished the construction of its first power plant in 1973, but later in1989 it shut down due to several failures. It later formed the Gas cooled reactors associates in 1977 after being joined by 28 utilities. Thereafter it greatly developed in its nuclear research and in late 1990s and early 2000s, the company started to invest in warships. It also became the part of winning companies in designing electromagnetic aircraft launcher for navy carriers. It is specialized in construction of weapons that are used as nuclear physic in the defense. It has invested a lot in research and innovations dealing with nuclear fusion. Despite this specialization, the company is not limited to them but also works on other related technologies (Steinberg, n.d.). Some of its outstanding products in the market range from airborne sensors to surveillance aircrafts remotely operated, including nuclear fuel cycles and even wireless electronics and laser technologies.

Recent Contract Awarded to the Companies

In 2011, the two companies were awarded th contract to structure a version of predator B. The model they were to make is known as the sky warrior, this four-year system demonstration and development was initiated to help test the phase of United States army extent UAV program-11. The contract was to entail development of twelve air vehicles with five ground operation stations. This comprises of a typical system of configuring predator, which is made up of four aircrafts. Amongst these, there is one ground control system and another Trojan Spirit III data-disseminating terminal. These air vehicles should have an endurance of more than forty-eight hours and a cruise speed of slightly above seventy kt. The contract was scheduled to be completed by 2015 to enable revamp of the security system of the nation by the army. This support is structured in a way that it follows conventional launch sequence from initially prepared ground in a direct line-of-sight control. This contract is worth $ 8.5 million in total and the two companies are to share the cost of a sixty percent and forty percent proportion respectively. General Atomics Company is to specialize in missile construction and installation of the predator where company is charged with the role of building the structure itself and providing test grounds and facilities.

The contract was awarded to the two companies because of their competence in developing comprehensive products and provision of services for military as well as commercial purposes worldwide. The two are known to be very flexible in their contracts and precise in their cost quotations; this facilitated their capacity to win this kind of contract with the army. Their great history and advancement in technology of the airspace contributed to their capability of fulfilling the contract since over time they have shown great capacity to commit all the necessary resources in order to develop products that their clients desire.

Contract Legibility

The best contract for both of the two companies is the fixed-price contract. This is because the two entities are involved in a wide range of activities in the military contraction of weapons, therefore they need a contract which is not subject to adjustments unless there are provisions stated to govern the adjustment once the contract is resumed. This can be explained by the changes in the economic conditions, which might adversely affect the operation and working of the entities. Situations like defective pricing also call for such adjustments, but if none of the above occurs, the fixed price quoted remains the one and the only operational basis for the companies.

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They are also better places for this kind of contract because it allows for negotiation in terms of the prices which the entities can operate with minus risking losses or running out of funds due to lack of enough resources because of undervaluation. This type of contract is also characterized by placing very low administrative burden on the parties contracting. This is safe as it lowers the risk levels that the entities can incur.


Direct Costs

Some of the direct costs of Boeing and General Atomic in this contract are; test costs, delivery costs and maintenance cost. The companies are responsible for the test cost of the predator they developed before giving it out to their client. The two had to ensure first that the structure developed was functional and suitable for the mission intended. Therefore, the cases of failure during the test were subdued to the company’s responsibility and they had to bear the costs. They also incurred cost of certifying the worthiness of operation of their products (Rothwell, Stavros, Sullivan, & Sullivan, 2010). This cost is not in any way the responsibility of its clients who have offered the contract.

The companies also have to cater for delivery costs, which are their responsibility. After the development of the device according to the contract with its client, it is the responssibility of the company to deliver the structure to the client’s premises. It then uses its resources in doing so, which then results to cost of delivery of its products. Before an aircraft or space machine is guaranteed authority to operate, it has to award the performance guarantee compliances.

Finally, the companies had to meet maintenance cost of the equipment used. Dickinson, Orr, and Hofmann (n.d.) noted that if this cost is not met, then they are destined for disasters. This could lead to their penalization by the federal authorities and they would have to cater for the destructions incurred by their instrument.

Indirect Costs

Other three indirect costs that the companies have ever been responsible of are; costs on excusable delay, cost of forming mergers and cost of adjusting to government requirements. The cost of excusable delay happens when the company compels to cater for the delivery cost while the agreement stipulates that the client is to be responsible for delivery cost of the structure developed (Rothwell et al., 2010). However, because the companies delayed in finishing the project they were then compelled to cater for the delivery costs. Second, the company is prepared to meet the cost of mergers and related charges once the need arises. In terms of governmental requirements, they have always been responsible for all taxes that the state levies on the project. Therefore, they use their own resources to pay these taxes. Conversely, the two companies have suffered from additional costs due to change in terms of the agreement. The company had to be fined by the client for not honoring the agreement signed according to the contract.

Importance of the Data

This data will help identify which companies are likely to have delay and therefore not meet deadline for the project. This is because any instance of delays creates a possibility of many more delays. Change of material, terms of agreement, ability to deliver and so on are important data since they provide information on what company is cost effective to work with (Rothwell et al., 2010). In addition, this will help in choosing the companies, with which to enter into deal. Issues with efficiency in operation are also important since they help identify which company can meet the quality requirements desired and which one cannot. This then makes choosing the company a very easy undertaking.

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Company to Be Awarded the Government Contract

According to data evaluated and data on the difference in companies’ performance, the chances are high that this contract will be given to General Atomic company, which does not only deal with construction of weapons specialized in nuclear physics, but also have huge investment in research and innovation (Dickinson, Orr, & Hofmann, n.d.). The company is also considered to be efficient in most of its operations. The costs of most of its contracts are relatively discernible and are not too high as compared to other companies. According to Dickinson, Orr, and Hofmann (n.d.), this then implies that the chances of the company accepting the $400,000 are higher, compared to Boeing.

The company is also responsible for bearing costs that result from their side not honoring the contracts, for instance, making deliveries in case of any delay. Competence and time efficiency of the company implies that the projects are finished in timely manner (Rothwell et al., 2010). This is important as it reduces cases of delays in the procurement of facilities and completion of the contracts.

Finally, General Atomics is a merger between two companies, and this implies an increased capacity to handle a contract with an elevated level of technological mastery and increase the chances for success unlike those companies, which exist as single entities. The chances of the institution running low of funds are also low; hence, it gives them an upper hand to gain this contract.

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