Government Contracting - Coursework Example

Government Contracting al Affiliation) Government Contracts American taxpayers expect the government to uphold efficiency and effectiveness in its performance activities. As such, the government is expected to engage in actions that add value for the taxpayers. Such commitment towards public service has prompted the President to reduce cost-reimbursement contracts on grounds that they costly compared to full and open competition. The cost-reimbursement contracts require that the Contractor be reimbursed any additional costs incurred while undertaking the contract.

For example, the dollars obligated to cost-reimbursement contracts rose from $71 billion to $135 billion in 2000 and 2008 respectively (The White House, 2009). It is preferred to use a firm fixed type contract because its application is realistic. Parties get the opportunity to negotiate a firm target cost and profit that will ensure that the contractor obtains a reasonable share of the potential risk. In addition, the contractor will be liable for the undertakings of the contract considering that he or she assumes a reasonable share of the cost responsibility.

In the cost-reimbursement contract, the government retains the greatest risk for the contract. In addition, the government reimburses the contractor a reasonable amount of expenses plus the profit. On the other hand, the contractor accepts the greatest risk in the firm fixed type contract since a target cost and profit is set at the onset of the contract. The main reason competition is preferred to sole-source contracts is the diversification of sources. In the sole-source contracts, there are limited number of sources; hence, minimal diversification.

Such contracts are responsible for the inefficient allocation of resources or poorly designed contracts. On the other hand, open and competitive contracts are favored due to the diversity of sources that enhances resource allocation and well-established contracts that meet the interests of both the Federal Government and the American taxpayer. ReferenceThe White House. (2009). Government Contracting.