Discussion and assignment

Acquiring a Contract with the Navy

Name

Institution

Acquiring a Contract with the Navy

A contract is a legally binding agreement that exists between two or more parties. In a contract, on party usually involves a buyer and the other a seller. Before one agrees to the terms of a contract, knowledge should be gained on the prerequisites of a contract. Below is an analysis of the details of the contract between our business and the navy.

Primary ways in which a Multiyear contract benefits both the Navy and our Business

A multiyear contract refers to a contract that exceeds one year, and one that does not exceed five years. Furthermore, a multiyear contract provides the performance of services of the supply of goods during the second and the subsequent years of a contract. A multiyear contract is contingent upon the appropriate of funds and in some cases provides the cancellation payment to be made to a contractor is the necessary appropriations are not made. In a multiyear contract, it is not necessary to establish the requirements or options for each year’s contract. There are various mutual benefits of a multiyear contract for both the Navy and our small business. Providing floor refinishing services for the Navy might seem to be tasking for the first one year. However, walking back into the same venue proves to be less stressful. Notably, within the second year, all the planning and management of challenging tasks have been handled, therefore, a contract proves sails smoothly after the after the second year. In the same fashion, networks and stronger relationships have been created.

For both the Navy and our small business, it would be easier to interact during the second year of our contract because understanding of each other’s perspectives has been gained. According to Arnold & Harmon (2013), there is less stress associated with a multiyear contract because knowledge has been gained on the location and the requirements needed by our clients. As a result, better and more refined services are offered. Financial commitment is another benefit of a multiyear contract. On the part of our company, there is the surety and guarantee of financial returns during a second year. On the part of the navy, a multiyear contract provides the guarantee of incentives and added value to the services. Conversely, cost savings is another advantage associated with multilayer contract because all inherent uncertainties associated to a project have been eliminated. In addition to that, there is the reduction of administrative burdens.

Two reasons why our Company would qualify under the HUBZone Act (FAR 19.5)

According to the HUBZone program, a business can qualify for a contract if meets certain criteria. According to Cheav (2013), the primary purpose of the HUBZone program is to provide federal assistance to businesses that are located in underutilized zones. The program aims to increase investment, employment opportunities, and economic development in the underutilized areas. With this in mind, there are various reasons that provide evidence as to why our business is more qualified to the navy contract compared to our competitors. First and foremost, our business is located in the HUBZone region. In addition to that, our business is small business in the aspect of size and on the basis of the North American Industry Classification System (NAICS).

Secondly, our employees consist of individuals from economically under disadvantaged areas of the United States. Almost all our employees and shareholders are U.S citizens thereby a large percentage of our business is owned by United States citizens.

In addition to the sentiments raised above, our business has established itself recently. The navy contract provides a pathway in which our business can chance expand and create a firm foundation. Because of the reasons provided above, we believe that our business wholly qualifies for the Navy contract. The contract provides a platform in which our business can be self-sufficient and expand itself further. Other than that, the contract provides ample opportunity in which our small business can display our skills and lay the foundation for more contracts in the future. The acquisition of this contract provides our company with the opportunity to expand and provide employment opportunities to citizens that live in the HUBZone region.

Bid Proposal

Procurement management is an essential tool that is provides assistance to businesses to understand the procurement concepts. In respect to our contract with the navy, the cost-reimbursement is the most conducive for our small businesses. In the cost-reimbursement contract, a seller is provided with reimbursement for work completed plus fee that represents the profits. A cost-reimbursement contract is most commonly used when there is risk or uncertainty involved in a project. Furthermore, it is worthy to note that in the cost-reimbursement contract, the buyer is the one who caters for all the risks involved in a project since he caters for all the risks. Under the cost-reimbursement contract are various categories. There is the cost-reimbursement fee contract that involves the payment of a seller for all incurred costs plus a fixed fee regardless of the performance of the contract. Secondly, there is the cost plus incentive contract that involves the reimbursement of a seller for all the costs plus an incentive fee based on the achievement of a certain level of performance. Thirdly, there is the cost plus award fee that involves the payment of a seller for all the legitimate costs plus an award fee. Lastly, the cost plus percentage of cost involves the payment of a seller for all the costs plus an incurred percentage for all the costs (Lewis, 2015).

In regards to the contract with the navy, the cost plus incentive fee contract is most conducive. In this aspect, our small business would be reimbursed for all the costs incurred plus an incentive fee that would be provided upon the achievement of certain performance objectives as outlined in the contract. The rationale for the selection of this contract type is based on the level of our business. Markedly, as mentioned above, our small business is at the beginning stages. The contract therefore provides an opportunity for our business to display the level of our expertise. With this type of contract in place, our small business would strive to produce a high quality performance in order to create a receive incentives for work completed as well as create a good reputation for our business.

Category of Incentives willing to be offered

Because of the magnitude of the project, there are various incentives that are willing to be offered on the part our company. The first form of incentive is in the aspect of performance. In this aspect, an analysis of the small projects that the company has undertaken in the past would be provided in order to provide the navy with the certainty of our quality work. Secondly, incentives in the aspect of costs would be provided. However, such an incentive would only be provided if only the navy agrees to provide our company with a multiyear contract. With this in place, a cost incentive would be provided. Thirdly, incentives would be provided in the aspect of repairs after the completion of the project. Notably, repairs would be provided for free fro any maintenance issue that erupts with the first year after the completion of the project.

Whether the Bid proposal should be technical, management, or cost proposal

In the aspect of bid proposal, various approaches can be utilized. First, there is the technical bid proposal that involves providing the intricate details that encompass a project. In the technical approach, knowledge must be manifest in the understanding of the requirements of a project. Secondly, there is the cost proposal that focuses on providing a detailed breakdown of the quoted price in the aspect of the cost elements of project materials. Lastly, there is the management proposal that involves the demonstration of how the staff that is involved in a project is qualified to take a contract. In the aspect of the contract with the navy, the management proposal is the most conducive. Notably, this is the first time for our small business to undertake such a huge contract. Because of this, the perfect opportunity is provided to advertise the level of expertise n our business. As a new business, the business market, more so the navy lack knowledge on the level of our expertise. Moreover, advertising the level of competency of competency of our team members is a good form of advertising and the promotion of our company.

Five potential risk factors to be considered

Despite being equipped with the right personnel for the project, there are various risk factors that need to be considered. First, there is the risk of loss. As indicated above, our small business has embarked on the first long-term contract. As outlined in the terms of the contract our business would be reimbursed for the costs incurred plus an additional fee for incase the performance standards have been attained. Notably, even though there is the certainty on the expertise of our team, there is no guarantee for the success of the contract. Because of this, a risk is posed on the financial returns on our company. Another risk posed is the termination of the contract before the multiyear period is over. Termination of the contract interferes with the planning in or company. The third risk that is posed is under performance. Notably, this is the first time that our company has embarked on such large contract. Because of this, this contract provides the framework for the availability of future contracts. Any failure on the part of this contract poses the risk of a bad reputation and image for our company. The fourth potential risk that is posed is in the aspect of the inability to procure capital necessary to support the project to the point of completion. As indicated in the contract, our company is required to come up with finances to complete the project. Only after the project has been completed can the navy make the necessary payments according to the costs incurred. Lastly, another potential risk to be considered in the project is failure of timely payment on the part of the navy. Lack of timely payment inconveniences our company in the aspect of the payment of the payment of our suppliers.

References

Arnold, S. A., & Harmon, B. R. (2013). The Relative Costs and Benefits of Multi-year Procurement Strategies. Institute for Defense Analyses. Documento NS D-4893.

Cheav, V. (2013). Programs of Parity: Current and Historical Understandings of the Small Business Act's Section 8 (a) and HUBZone Programs. DePaul Bus. & Comm. LJ, 12, 477.

Lewis, H. (2015). Bids, tenders and proposals: winning business through best practice. Kogan Page Publishers.