Case: You have been hired by a federal agency that has recently received an audit report on its construction-contracting practices. The report concluded that the current practices of the agency might be preventing the use of the most advantageous contractual methods of acquiring construction services.
Between February 2007 and January 2008, the agency executed forty contracts (representing a total of approximately $339 million). These contracts were reviewed during the audit, and thirty-three (83 percent) of them were negotiated as cost-reimbursement contracts, which represented the lowest monetary risk to the federal government.
The auditors recommended that a better review and selection of the contract type could be facilitated by improved control in coordination and planning of the contract type. First, there was no appropriate justification for the selection of a contract type or for the methodology used for selecting contract types. In addition, cost-reimbursement contracts were used routinely and little effort was made to convert follow-on work into less risky contract types, even when it was evident that firm prices for follow-on work could be determined prior to the award of follow-on contracts.
Questions:
As part of the procurement or contracting department of this federal agency, you need to demonstrate your understanding of the different project delivery methods and contract types available to the agency. What are the key features of alternative project delivery methods and the key differences between the two main types of contracts mentioned above? In addition, which contract type can be best used with which delivery system?
What are the project circumstances under which one type of contract would be justified over the other?
What steps would you take for each of the contract types to ensure that the agency does not continue to waste taxpayer money through its procurement practices?
What steps would you take to ensure that you could effectively convert follow-on work for projects originally negotiated as cost-reimbursement contracts into fixed-price contracts?