Question: All sorts of interesting issues come up when the government gets into cost based contracts. Here are some scenarios for you to consider. Put your risk management hats on and for one of the following scenarios, tell me what issues are involved and what the contracting officer or the contractor should be concerned about and why.
You might also suggest some ways to reduce the risks you have identified. I know you are going to want to respond to all of these fascinating scenarios, but don't. Pick the one that interests you most or one that no one else has responded to and comment on other responses to the other scenarios.
Your company sells widgets to many types of private customers, consumers, retailers, and wholesalers. Your sales force has a lot of independence to cut deals with major customers. You decide to start selling to the federal government. To do so, you decide that a GSA schedule contract is the way to go. What issues should you be concerned about when it comes to proposing prices for the GSA schedule contract proposal? Are the cowboys who sell your products to commercial customers going to create risks for the company?
Your company is a alternative energy consulting company that has exclusively worked with commercial clients. You were invited by a nearby Army base contracting office to bid on a project to advise the base commander on how the base could implement solar and wind power projects on the base. You struggled through preparation of a proposal in response to the RFQ. After some discussions with the contracting officer and the base technical personnel, your company has been awarded a cost plus fixed fee contract. What issues should you be concerned about in terms of getting paid for your work? What is your CPA going to tell you that you have to do?
You are a project manager in the Department of the Interior''s Mineral Management Services (MMS). You are reviewing the report of your support contractor about the disaster recovery plans for a number of oil drilling rigs in the Gulf of Mexico. The report says that these plans meet all federal requirements. Being somewhat cynical, you wonder why there isn''t something that needs to be corrected on at least one plan and so you browse through a couple of the plans. Toward the end of the reports, you see that one of the authors of both plans was also one of the authors of the report to MMS. In addition to the plans providing for the protection of the walrus population, what is wrong with this situation? What should you do before the reporters from 60 Minutes show up with their cameras?
As a new contract specialist in an unnamed three-letter federal agency, you have just finished negotiating a sole source, fixed priced contract worth over $100 million. One of the really difficult points in the negotiation was the price of the 20 Cadillac Escalades required for performance of the contract. The contractor had given you quotes from 3 different dealers as the backup for the costs proposed for the contract. Now, a month into contract performance, you learn that the vehicles have been recalled for an unfortunate tendency to unexpectedly take sharp left turns when traveling at 70 miles per hour. When you approach the contractor''s program manager with your concerns about this recall, he says not to worry. The company had heard rumors about this some time ago and they can get Ford Expeditions instead of the Escalades. What issues are raised by this scenario, why and what might you do about it? What contractual provisions might be called into play?
The company's purchasing director is very experienced, having been on the job for more than 10 years. He is so dedicated he hasn''t taken a vacation in 5 years. Your company seems to have a very stable set of subcontractors with whom the company has been working for several years. This helps the company know that when it orders something, it will be supplied on time. The only problem is that as the CEO, you can''t seem to get him to increase the percentage of subcontracts to minority and women owned companies. What concerns might you, as CEO, have and what should you do about it? Should you be hiring a forensic accountant? If so, why?