Long-Term Relationship - Assignment Example

Long-Term Relationship Answer Contract financing is very important to contractors and payments onindividual contracts are visible to individuals who are in those government departments and are charged with monitoring contract compliance. Contract financing is the disbursement of monies to a contractor under a contract clause or other authorization prior to acceptance of supplier or services by the government. There are different types of Contract financing payments. These include Performance based payments, Advance payments, Progress payments based on costs incurred, Progress payments based on a completion percentage and Interim payments under a cost-reimbursement contract. Performance based payments Performance based payments are preferred government financing method when the CEO if a company finds them to be practical and the contractor agrees them to their use. Performance based payments are contract financing payments which are not payments for accepted items. They are fully recoverable in the same manner as progress payments in case of default. It is not used in case of payments under cots-reimbursement line items when the contracts are assigned for progress payments based on a completion percentage and for those contracts which are awarded through advanced procedure of sealed-bid. Performance based payments are made on either a whole contract or a deliverable item basis unless it is prescribed by agency regulations. Financing payments which are made on a whole contract are applicable to the entire contract and not to specific deliverable items. Since the business can take the idea and form concept phase to full implementation phase then Performance based payments can help the company is achieving good returns for the company. The quality of the work will improve since on the basis of delivery of goods, monies will be paid to them. Thus indirectly the performance of the business will improve as they will try to deliver the best results which they can. Advance Payments Advance payments are least preferred method of contract financing and should be used sparingly if at all. Other types of financing should be available to the contractor in adequate amounts. But credit and loans at excessive interest rates or other exorbitant charges are not considered reasonable available financing. Such type of financing is considered to be useful and appropriate in the cases where Contracts are solely for the management and operation of government-owned plants. It is used in contracts for research, experimental or development work with nonprofit education or research institutions. It is useful for contracts of such highly classified nature where agency considers advance payments necessary for national security. It is also appropriate for contracts where contracts are assigned to the contractors with financial weakness only for their technical ability which is considered as highly essential for agency. Thus Advance payments contract will help the firm in getting payments in advance and they can use that money to buy raw materials needed for the project to get underway. Progress payments based on costs incurred Progress payments can be customary or unusual in nature. Customary progress payments are those that are made under the general guidance using the cost base, customary progress payment rate and the frequency of payment included in the progress payments clause. Other progress payment is considered unusual in nature and is used only in exceptional cases when authorized. The customary progress payment rate is 80 percent and it is calculated on the total costs of performing the contract. For small business concern, the customary rate for contracts with small business concerns is 85 percent. Such type of financing is used only in cases when pre delivery costs of contract necessitates that are too high with respect to contract price and also with respect to creditworthiness as well as working capital of the contract. The company is engaged with production of equipments within a short period of time using robotics. But progress payments are not needed for the company since it the company is a big company and it does not have capital problem. Again since the firm can deliver the contract within short time period they will have fast cash cycle and hence the working capital needed can be sourced from other contracts which they deliver (Boyd, 2012). Answer 2 . The company is a large company which takes an idea from a concept phase and within a short time period delivers the result. This is due to robotics they use in their machinery department. The company wants to expand and get contract from the government for delivering unique products. In such cases performance payments is useful to the company and to the government. With the performance based payments the business can receive a pre agreed payment for completing a milestone which is agreed beforehand. Performance based payment is useful to the business since they will have high degree of control over the time when they will receive payment. Again the business need not be audited at the time of receiving the payment every single time. Again in case of performance based payments the government covers up to 90 percent of the pre agreed price at the milestone which is up to 80 percent in case of cost with progress payments. Again performance based pay focuses on accomplishing the meaningful and measurable technical progress and on achieving the schedule commitments. This method creates a link between contractor’s financing payment and critical aspects of schedule and technical connectivity for successful performance. To ensure success, both the parties need to negotiate at the time of contract formation the accomplishments which will be measured, how the measurement will be made and what value will these accomplishments have for financing payment purpose. Hence for it to be successful objectively determinable performance accomplishment needs to be achieved by the business which will make the business more efficient. Answer 3 The business needs to implement many polices within the company due to the presence of The Defense Audit Agency. At first the business needs to have timekeeping polices which it needs to implement. The supervisor who needs to grant and cosign all the timesheets is always restricted from completing a timesheet of an employee who is absent for a long period of time due to some form of authorized leave. In case the employee has gone on travel, the supervisor for the employee can prepare the timesheet. When the employee returns, the employee should turn in his/hr timesheet and attach it to the one prepared by the supervisor. The guidance should state that the nature of work determines the proper distribution of time and not availability of funding, type of contract or other factors. The policy of the business should clearly state that complete and accurate preparation of timesheet is the responsibility of the employee and any careless or improper preparation may lead to disciplinary actions under the policies of the business and Federal statutes also. The business needs to do Labor Floor Checks or Interviews. DCAA auditors will perform periodical physical observations of the work areas and will interviews the employees to see if the employees are actually working and they are performing job as assigned to them. Business has to follow Labor management agreement according to DCAA guidelines. The cost of compensation is not allowable to the extent that they result from provisions of labor management agreements which as applied to work in performing Government contracts are determined to be unreasonable because they are either unwarranted by the character and circumstances of the work or discriminatory against Government. The application of the provisions of labor management agreement designed to apply to a given set of conditions and circumstances of employment is unwarranted and when applied to a Government contract involves significantly different circumstances and conditions of employment like work involving less hazardous activities or work continually requiring use of overtime. This is discriminatory in nature against the Government if it results in employee compensation in surplus of that is being paid for same type of non-Government activities under similar situation. Disallowance of work will not be made accordance to the policies. Salaries and wages for current services include gross compensation paid to the employees in the form of stock, cash, products or services. In cases when the personal services are performed in a foreign country, compensation can include a differential which may properly consider all expenses which is associated with foreign employment like cost of living adjustments, housing, bonuses, transportation, additional State, Federal, foreign or local income taxes resulting from foreign assignment and other related expenses. As far as bonuses and incentive is concerned the employees can be given many forms of bonuses like cash bonuses, safety awards, suggestion awards, incentive compensation on the basis of cost reduction, production, efficient performance etc, are paid or accrued under an agreement which is entered into in good faith between the employees and the business before the services are rendered (Defense Contract Audit Agency, 2012). Answer 4 Business who wants to expand has to take into account many change and hence the internal controls should be included for periodic independent management review. In addition to the independent management reviews, the quality of the services performed by the IT Department contractor should be ensured by the establishment of a separate function within the department devoted to maintaining establishment standards of quality function. The review plans, measurements and schedules should be developed, standardized and maintained by the quality function to establish criteria for the guidance of assigned personnel. The company should ensure that reports on the results of quality reviews should be prepared and submitted to user management and IT management. It is the responsibility of the contractor to organize and administer the purchasing department to ensure the efficient and effective procurement of required quality materials and parts at the most economical cost from responsible or reliable sources. There must be procedures to provide for the selection of the most responsible and reliable sources for furnishing required quality materials and parts. Such kind of procedures should endorse aggressive sourcing among all dependable suppliers so as to gain the most rational prices from resources which fulfill quality requirements of contractor. The contractor must use vendor evaluation system when selecting sources. The system must provide reviews on price, delivery, quality, technical and financial capabilities, and service. The contractor must document vendor evaluations on each buy or have a vendor rating system. If the contractor has any rating system, the system should allow for consistency of comparisons among competing subcontractors, provide documentation for each element rated, and provide for evaluation by functional areas. The contractor should establish and maintain policies and procedures for receipt and inspection of material (Defense Contract Audit Agency, 2014). It is the responsibility of the company management to monitor its compensation programs to ensure that they are properly administered and maintained and result in compensation costs paid for services rendered on Government contracts which comply with the requirements of DCAA. References Boyd, B. 2012. The COR/COTR Answer Book: Third Edition. New York: The COR/COTR Answer Book: Third Edition. Defense Contract Audit Agency. 2012. INFORMATION FOR CONTRACTORS. Retrieved from: http://www.dcaa.mil/DCAAM_7641.90.pdf. Defense Contract Audit Agency. 2014. CAM – CONTRACT AUDIT MANUAL. Retrieved from: http://www.dcaa.mil/cam.html. 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