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Cost Type Contracts

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Discuss and debate the use of cost type contracts in the federal procurement arena. Specifically, do cost type contracts serve a valuable and legitimate purpose in federal contracting or are they a windfall to government contractors? When should cost type contracts be used if at all? Are there specific cost type contracts that are in the best interest of the Government? Please be sure to provide examples to support your position.

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Solution Summary

This posting gives you a step-by-step explanation of cost type federal government contracts . The response also contains the sources used.

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Step 1
In the federal government arena the use of cost type contracts has a special place. The federal government specifies beforehand the allowable expenses that will be paid to the contractor. The federal government pays exactly those expenses plus the allowable profit. From the point of view of the federal government the contracts lead to better quality because contractors avoid using inferior materials, and lower labor. Also, the contractor incurs important expenses that are guaranteed reimbursement. To the federal government a cost type contract offers flexibility when trying to complete a project(a). For example, when fighting a war, the federal government can offer contractors bonus money for assuming higher risks.

Step 2
cost type contracts are not ...

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