Case Analysis : Lump Sum Contract

The cost-plus-incentive- fee contract is completely different from the two previous contracts. This contract is starts with a stated fee but offers the flexibility of requesting for additional charges for incurred cost during the project. Which is very beneficial to the contractor because it will offer the contractor the option to increase contracted amount in circumstance of unknown risk.

A contract is formed when an offer by one party is accepted by the other party. Consideration is the price paid for the promise of the other party. The price must be something of value, although it need not be money. Consideration may be some right, interest or benefit going to one party or some, losses or responsibility given, suffered or undertaken by the other party.

Fixed-price contracts use a fixed total price for the defined product, service, or result to be provided. The seller has the most risk in this contract type because they are obligated to complete the contracts and they will have to pay financial damages if they do not complete it. In the cost-reimbursable contracts, cost reimbursements are involved with additional fee that represents seller profit. This contract type is flexible especially when the project scope changes. Buyers have the most risk in this contract because it is possible that sellers increase prices and fees in the process. The time and material contracts is a hybrid of the fixed-price contracts and cost-reimbursable contracts. Buyers have the most risk in this contract type because the contracts can be open-ended allowing the sellers to increase the price of materials or services.

Time-and-Material Category: in such contracts, the parties negotiate hourly rates for a defined type of labor and would agree on the seller gets reimbursed for parts and materials at cost. These types of contracts resemble cost-reimbursable contracts in that they can be left open ended and may be subject to a cost increase for the buyer. The full value of the agreement and the exact quantity of items to be delivered may not be defined by the buyer at the time of the contract award.TIME AND MATERIAL CONTRACTS (T&M) It is often used to obtain a wide verity of professional services, such as information technology services, acquisition support services, equipment repair services, and etc.example: Business consultant to an hourly rate of $150.

A cost plus, is a fixed-price contract where the contractor paid for all the allowed expenses to certain limit

A contract could be tailored on a number dimension to meet the specific needs of buyer such as average temperature, rainfall, snowfall, a heat index, or the number of heating or cooling degree days. The payoff structure could resemble a put option, a call option, a swap, or combinations of these structures.

Project Management is the art of arranging, sorting out, spurring, and controlling resources to attain specific objectives. A project is a brief endeavor intended to deliver a unique product, service, attempted to meet extraordinary objectives and goals, commonly to achieve helpful change or included quality.

Expand the provision for agencies to participate in structured settlements to include claims and scheduled awards - §10.713

On the business field, a contract is usually between someone who provide a service to a hirer for money. You are promising to do a job for the hirer and the hirer is promising to pay you for it. (government) There is different type of contracts with two major groups: fixed-price and cost-plus contract.

Project management is defined by BusinessDictionary.com as, “Approach to management of work within the constraints of time, cost, and performance requirements.” Project management requires careful planning and studying all of the factors involved with in the project. Project Managers must first establish the needs of the stakeholders and provide a project plan which includes the cost and time frame the project will be completed. In addition, projects requirements should be clear and concise to ensure the Project Manager stays within

The main purpose of the lump sum payment provision is to reduce the design and administrative costs incurred with the unit price contract (1). The lump sum contract is the most basic form of agreement between a contractor and the STA (1). Here, the STA will estimate the project cost by breaking down the work into several construction pay items and applying current average unit prices. The contractor uses the same method when developing the bid but adds up a contingency to cover for the risks that it bears (1).

What is project management? Project management is the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements. (PMBOK 2004)

The firm-fixed price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract places maximum risk and full responsibility for all costs and resulting profit or loss. This requires less administrative burdens upon the contracting parties. The firm-fixed price is suitable for supplies and services.

A project manager can be considered the project owner. A project can be anything from

Project management is a series of steps taken in sequence to manage a project through all phases from conception to completion. The steps are documented in a strategic plan. The plan is used to ensure that all parties are working towards a common goal. Project management requires applying knowledge, skills, tools and techniques to specific activities in accordance with established standards and guidelines. There are five basic functions of project management: planning, organizing, staffing, directing, and controlling. Basic activities of project management include: identifying project requirements to define the outcomes; addressing various needs, concerns and expectations of others; setting up, maintaining and carrying out communications; managing others; creating project deliverables; and balancing competing project constraints.