Acquiring a Contract with the Navy - Assignment Example

Acquiring a Contract with the Navy Lester Myers Dr. Sonia Ashby Bus 319 May 14, Reasons for qualification of LesterMyers, Inc business with respect to HUBZone Act (FAR 19.5) LesterMyers, Inc is involved in the business of refinishing the small business floor using its speciality products such as coating products associated with marble floors and ceramic tiles. In order to gain success in local business the concerned company has decided to compete for the Navy contracts. The concerned company has received the Request for Proposal (RPF) #123456789, dated 07/14/2014. Moreover, the company through its reliable sources has gained knowledge that a local competitor also has received proposal for offering similar type of product and service to the Navy. This has raised the importance of negotiation in order to win the bidding on a contract with Navy (Dilger, 2013). In United States, most of the jobs are created in small business as a result of which initiative for growth and development of the concerned sector has been taken into account through the implementation of federal contracts. The Small Business Act (1953), states the importance of federal contract for the development of concerned sector. The Act further states that equal opportunity is provided to small sectors to ensure participation in the federal contracts. In the context of small business, HUBZone set-asides for small business that restrict some contracts associated with the same. Lester has developed the business across the regions and has been creating a huge amount of impact on the overall area and developing the effectiveness of the system. Therefore, it can be considered that with respect to the policies of the Act LesterMyers is qualified for gaining the bid contact of Navy. In addition Lester has the proposed financial capacity that helps in developing as well as supporting it to meet with the needs of specifications of HUBZone (Dilger, 2013). Primary way(s) in which a multiyear contract would benefit both the navy and LesterMyers, Inc The multi-year contract signifies continuous purchase of products and services from the same supplier for the period between one to five years at maximum. In case of multi-year contract, it becomes essential to maintain the performance according to terms of contact because it may lead to cancellation of payment to the concerned contractor. A multi-year contact is likely to be beneficial for Navy because it reduces the problem associated with seeking to identify the potential supplier of services. The changing rate of inflation as well as other market factors is likely to affect the price associated with the service (Jensen, 2006). In such case, multi-year contact is beneficial for navy as it ensures that change in prices does not affects the overall value of contact. A multi-year contact is generally preferred in case if there is a requirement of same service by the concerned buyer for a long time. In case of navy, the coating product for ceramic tile and marble floors are always required and therefore it is likely to be beneficial in terms of overall cost involved in availing the service. The multi-year contact is also beneficial for LesterMyers as it enables lowering the cost involved in bidding process as well as ensures saving important time. On the other hand, the contract ensures continued production of coating products that in turn indicates long term profitability of the concerned business. The multi-year contract signifies long term relation with Navy that in turn reduces the administrative costs associated with the bidding process. In addition to this, the multi-year contract expands the competitive base in relation to coating products business. The increase in competition ensures production of quality products that is turn is beneficial for the buyer of concerned service (Jensen, 2006). Basis for Bid Proposal The bid proposal for the concerned business is determined on the basis of the type of contract that is associated with the business. The bid proposals are mainly classified into three categories including fixed-price, a cost-reimbursement, or a time-and-materials type of contract. In case of fixed price, the final cost of the service provided by LesterMyers, Inc is set on the basis of agreement between both the parties involved in the contract. The terms of contract indicates the total period of time for which the time fixed by both the parties remains valid. A contract on the basis of fixed price is beneficial for both the parties involved in the contract as it ensures profitability on both sides (Lewis, 2009). In the context of market value, the increase in price of material is likely to be beneficial for the supplier of services. On the other hand, the fall in prices is beneficial for the concerned buyer of service. The terms of price are fixed in the beginning of the contract and therefore are not influenced by any kind of changes. LesterMyers, Inc is involved in small business and therefore fixing the prices in beginning of contract is likely to have negative impact on the overall growth of business. On the other hand, the profitability of business is influenced by fixed price of the contract. Therefore, fixed price bidding proposal is not preferred for the concerned contract that is being formed. Another type of bid proposal is cost-reimbursement that is considered the substitute of fixed-price proposal (Lewis, 2009). This type of contract ensures payments to the seller of service with respect to the actual costs involved in providing service to the buyer. The cost-reimbursement contract is preferable in case when the quality of service is more vital with respect to the cost of product or service. One of the major disadvantages of cost-reimbursement is that the provider of service is unable to predict the amount of material that is required for providing the services associated with the contract in a successful manner. This in turn increases the risk of the seller of product or service. On the other hand, the time and material bid are based on the actual working hour with respect to the seller of product and service (Lewis, 2009). The buyer of concerned service is required to pay the supplier on the basis of hourly work performed by the seller of service. The time and material bid are more flexible in comparison to other bid proposals as it facilitates the fulfilment of the changes with respect to the terms of contract. In the context of time and material bid, the proposal is effective in maintaining open communication between the parties involved in the concerned contact. On the other hand, open communication between the parties also ensures reduced problems that in turn minimises the number of written amendments in the contract. From the above analysis of different bidding proposals, it can be estimated that cost-reimbursement along with time and material bid is likely to be beneficial for LesterMyers, Inc. However, for developing the overall capacity and the company development LesterMyers, Inc. would bid for cost-reimbursement (Lewis, 2009). Different Category of Incentives The types of incentives offered by the provider of product or service can be classified as cost, schedule, or performance. The main aim of providing incentive is to retain the buyer of service for a longer period. Additionally, the incentive provided to the buyers also has the potential for growth of the concerned company as it increases the probability that is involved with multiple year contracts. When contract bids are put forward, the buyer of service has the potential to influence the type of contract. The cost incentives are likely to be beneficial for the provider of service as it has the potential to reimburse the overall cost involved in providing the services (Federal Acquisition Regulation System, 2005). In addition to this, the price paid to the seller of service is likely to be negotiated by the buyer. Therefore, cost incentive is beneficial for LesterMyers as it has the potential to reduce the risk involved in negotiating in terms of cost. The performance based incentive is generally paid on the basis of the type of service provided by seller. The performance incentives are a kind of reward for the concerned seller of service. The amount of incentive depends on the quality of performance of seller. It becomes difficult for small business owner to enhance the quality of service on regular basis with few employees. However, the quality of service is likely to improve with more number of qualified employees. Therefore, form the above analysis it can be stated that LesterMyers is likely to prefer cost incentive as it reduce the overall risk involved in providing services for the same (Federal Acquisition Regulation System, 2005). Type of Bid Proposal The technical bids are mainly involved with technical details associated with the type of service provided to the buyers. In addition to this, the proposal also reveals that the commercial as well as trade terms and conditions have been specified in a far more detailed manner. The technical bid evaluates the technical specifications associated with different equipments utilised in providing services. The bid proposed by LesterMyers is not very technical as the business is small, as well as the service provided does not involve maximum use of technical equipments (Lewis, 2009). The cost bid proposal enables the seller to charge maximum price for the service provided. The cost bid type of proposal ensures profitability in terms of cost of production that is associated with the business. Therefore, the cost bid proposal is likely to be preferred by LesterMyers as it has the potential to minimise the overall cost involved in providing the service. On the other hand, the proposal to management involves variety of statement including profit generation, communication with the concerned seller of services, as well as other measures that are likely to be profitable for the service providers who are providing services (Lewis, 2009). Potential Risk Factors If LesterMyers, Inc Is Awarded the Contract The risks likely to be faced by LesterMyers include price competition that has the potential to minimise the number of year with respect to the terms of contract. Moreover, the increase in number of supplier is also a threat to the concerned company as it may reduce the overall profit margin. On the other hand, multiple contracts with buyer also require continuous production quality service. It becomes difficult for the small business owner to maintain the quality of service with few numbers of employees. The contact risk is another threat for LesterMyers as it has the potential to terminate the relation between buyer and seller of service (Siedel & Haapio, 2013). References Dilger, R. J. (2013). Small business administration hubzone program. Retrieved from https://www.fas.org/sgp/crs/misc/R41268.pdf Federal Acquisition Regulation System. (2005). The code of federal regulations of the United States of America. US: U.S. Government Printing Office. Jensen, J. E. (2006). Quick reference to federal appropriations law: Second edition. USA: Management Concepts Inc. Lewis, H. (2009). Bids, tenders and proposals: Winning business through best practice. UK: Kogan Page Publishers. Siedel, G. J. & Haapio, H. (2013). A short guide to contract risk. UK: Gower Publishing, Ltd Read More