Cost reimbursement contracts are suitable for use only when the uncertainties

Cost reimbursement contracts are suitable for use

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Cost reimbursement contracts are suitable for use only when the uncertainties involved in contract performance do not allow the anticipated costs to be estimated with sufficient accuracy to use any type of fixed-price contract (Feldman & Keyes, 2011, p. 293). A cost reimbursement contract can be used to eliminate undo risk because the contractor will be able to recover all costs that are deemed to be allowable. It may not always be a good idea to use a cost reimbursable contract because there is not much incentive or obligation for the
contractor to exercise control over his costs. This is why it’s important to establish cost limitations or price ceilings for this type of contract to avoid overruns. There is some degree of control because the CO can also increase the amount of the contract’s funding if needed to complete the work. Use of a cost reimbursable contract would also have to be used for a contractor with a reasonably good performance, acceptable financial audit history, no procurement violations, and has a system for monitoring expenditures. All cost reimbursement contracts are subject to the limitations of FAR 16.301-3. They may only be used when: A written acquisition plan has been approved and signed at least one level above the contracting officer; The contractor’s accounting system is adequate for determining costs applicable to the contract or order; Prior to award of the contract, or order, adequate Government resources are available to award and manage a contract other than FFP, to include at least one qualified contracting officer’s representative prior to award of the contract or order; and Appropriate Government surveillance exists during performance to provide reasonable assurance that efficient methods and effective cost controls are used. Other types of contacts (e.g., Fixed) can be used for low-dollar amounts, small purchases, etc. There are several types of cost reimbursement contracts such as Cost Plus Incentive Fee (CPIF) or a Cost Plus award Fee (CPAF) which pretty much adequate cover the different types of scenarios needed to support government procurement activities. Therefore, any revisions I could suggest would be in the form of the government monitoring contractor performance. Cost reimbursement contracts can involve large dollar amounts which require close contract administration and surveillance as prescribed by FAR Part 42. Take a position on whether cost reimbursement contracts are necessary in government contracting to the extent they provide a means not available in other contract forms. Discuss under what circumstances you would consider the use of cost reimbursement contracts. Include an example to support your position. I think contracts should have the option of adding money for expenses to allow unforeseen cost. Snow contracts is a good example of services that would full under this category. Snow removal can be unpredictable and therefore would require flexibility.

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