Naval Operating Base Case Study

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Naval Operating Base Case Study: Since the Trustworthy Equipment Company that Lieutenant Early, a Navy contracting officer, was negotiating with was giving her problems, she was surprisingly engaged in a challenging sole-source negotiation. The Trustworthy Equipment Company was the only supplier of the costly special machine that was useful in the maintenance and repair of nuclear submarines. The firm included several overhead rates that were considered to be too high such as manufacturing and engineering overheads that were 170 percent and 93 percent of the direct labor and direct engineering labor respectively. In addition to the general and administrative expenses being 25 percent of the operating cost, the company included a contingency allowance estimated at 3.3 percent of all the other costs. Questioning Costs Originating from Inefficient Management: An analysis by Lieutenant Early revealed that the Trustworthy Equipment Company had overhead rates that were unusually high as compared to other companies in similar overall line of business. The unusual high overhead rates contributed to a high quotation with costs that are seemingly associated with inefficient management. Since this is a sole source negotiation, the fundamental concern is how the Navy organization can create leverage in order to promote an efficient outcome and deal ("Creating Leverage", 2012). It's important for the buyer i.e. Navy organization to raise the focus beyond details of the particular
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