Long Term Relationships - Assignment Example

Contract Financing Introduction In many cases, the government relies on the private sector for the providence of commercial goods and services (Schooner, Edwards, Nath, and O’Brien, 2007). Although some tasks are specifically carried out my government personnel however others are completed as part of contracts. Performance is a key consideration when contracting certain tasks to the private sector. A tender notice by the government generally prompts proposal solicitation where contractors compete for a government contract. But before that, a need or problem is recognized by the agency for which to acquire goods or services from contractors. Next, descriptions of the agency’s needs and requirements are detailed out which includes, contract financing, performance, administration and other technical functions. Contract Financing Approach Specifically talking about contract financing or monetizing, there are numerous methods for contract financing. Advance payments involve the payment of money to the contractor by the government before any services or goods have been received. By doing so, the government anticipates performance by the contractor under one or more contracts thereby liquidating them from payments. Since this method of payment is not performance oriented, it differs from other modes of payment that are performance based. Advance payments are usually employed as a method to pay prime contractors so that they may pay subcontractors (DCAA, 2012). Progress payments, as the name suggests, involves the payment of money as the work progresses and costs are incurred along the way. However, this progress does not include payments based on completion of certain stages, partial deliveries, partial payments in case of contract termination, and performance oriented payments. Legal and financial government institutions such as the Federal Reserve Bank may also guarantee loans to individuals so that contractors are financed in order to pay for the acquisition of goods and services. Such financing mainly comes from the private sector under the terms of the contract. Under particular statutes, progress payments for the completion of a certain stage is authorized which is used under agency procedures as a method of payment. Performance based payments involve the measurement of performance in terms of quantifiable variables so that quality standards are maintained while the said tasks are completed. Contract financing is also one task which involves a lot of legalities and documentation which cannot be afforded by any small organization whose operations are not large enough to afford such endeavors. Proper documentation and contracting involves several reports and invoices, which the company must carefully take into account. Documentation of acceptance is a key document which mentions the completion of the agreed tasks, receipts for all the goods and supplies, invoices, and all the paperwork that is involved (Cibinic, Nash, and Nagle, 2006). Payment is an essential phase in the contract financing and acquisition process and documentation and reporting helps provide relevant information so as to enable speedy payment, delivery of items and completion of tasks. Both receipts as well as reports help in the payment process and also guide and direct the activities of the contractors as it provides a deadline for them to pace up their work accordingly. For the organization, contract financing seems to be a quite relevant tool in order to raise capital although it does involve several considerations such as payment, quality, performance, and so on. Contract financing can provide the company with a relatively cheaper method of raising money so as to buy the required equipment, for example for the running and maintenance of the robotics. The robotics provides an efficient way of producing the company’s products and to deliver its services. Although the competition would be fierce for the company in contract financing, the advanced robotics technology can provide the company with an edge. Contract financing can further provide the company with the necessary working capital in order to afford the expensive infrastructure required for seamless running of the production line. With an increased level of contract revenue, the company can benefit from the business it earns the company. Also, the enhanced working capacity can allow the organization to better cater the consumer needs. In the case of our organization, the terms of the contract must be flexible enough to allow minor situational changes although it must also be preferably long enough to incorporate responsibility. The end user plays an important part in the agreement as the contract is end user oriented, as they are the recipients of the equipments, goods, and services. In this case, the robotics technology is a significant motivator as it is currently a new technology that can carry out production activities quite efficiently. Furthermore, its status as a patented technology means that only the authorized supplier possesses the right for its providence and development, an advantage which can prove useful in the competitive environment and can help the organization rake in high incomes based on the technology as it can assist in lowering the costs of production. Policy Considerations under DCAA While competing in contract financing, the organization will also have to follow certain rules and guidelines laid down by the Defense Contract Audit Agency (DCAA). With government contracts, the tasks can take months and years before it is completed, which is why contract financing can help finance the responsible parties in helping them pay off their costs. The most appropriate approach for our organization would be cost-based financing as it can allow the company to obtain a reimbursement for all the incurred costs as progress is made. The DCAA as an institution is involved in auditing the costs incurred so that no unfair costs are documented and quality standards are maintained while delivering the services. All the documentation, receipts, reports, invoices, and all the accounting records are considered by the DCAA. This allows the DCAA to verify all the details to make sure that they are in compliance with the terms set out in the contract (DCAA, 2012). Auditors from DCAA provide assistance in developing the contract financing template and also help in the negotiation process. The robotics technology held by the organization is a valuable asset and resource for the company and its value is of vital importance when auditing. Apart from this, many legalities apply under the rules set out by the DCAA where mischarging can result in severe penalties. This is the case when the charges are manipulated in order to show an overstated value and this is where auditing comes in handy. Auditing allows that costs are written exactly as incurred and are not manipulated so as to earn higher reimbursement for a task that did not incur any higher costs. Criminal charges apply in cases of mischarging where penalties are implemented upon the offender. Thus, the audit allows a useful evaluation of costs and other data, although several legalities apply. Quality Assurance Performance is a frequently addressed issue in government contracting as it demands quality, consistency, and performance in tasks that have been contracted out. The government carries out its own evaluation of the quality and performance as being completed by the contractors (Schooner, Edwards, Nath, and O’Brien, 2007). Every contract expects and lays down a clearly articulated set of quality standards which are expected to be met. A significant part of the payment process is quality and performance whereby the completed work must comply with the expected quality standards in order for the payment to be processed. Progress payment is one time of payment where the money is paid out as the work is still being done. In order to have a certain form of insurance, quality plays a vital role in determining how the work is being carried out and whether the progress is happening on satisfactory levels or not. Mischarging is already accountable for criminal charges. Another problem is that with overpayments in cases where advance payments have been made however, the quality of the completed work is not up to the standards of quality as agreed in the terms of the contracts. Again auditing helps to identify and clarify such discrepancies in the accounting reports. Any deficiency in quality is seen as bad work and may also hurt the company reputation, particularly as the organization is a reputed company owning high-tech advanced robotics for efficient outputs. Disagreements over quality can also occur hence the organization will try to maintain the quality requirements by putting a few automated checks in place. Big data analytics can greatly help in this age of digital world where useful metrics and measurements can provide helpful insights as to the performance of the robotics. Also, quality can be controlled by engaging the quality control department in order to ensure quality standards are followed and are met. Efforts to control quality can help prevent overpayments and can also ensure high quality product or service delivery so that the company’s image is maintained. References Cibinic, J., Nash, R. and Nagle, J.F. (2006). Administration of government contracts. 1st ed. Washington, DC: CCH Incorporated. Defense Contract Audit Agency, (2012). Information For Contractors. [online] Available at: http://www.dcaa.mil/DCAAP_7641.90.pdf. Schooner, S.L., Edwards, V.J., Nath, R.C., and O’Brien, K. (2007). The government contracts reference book. 1st ed. Riverwoods, IL: CCH. Read More