Federal Contracting Activities and Contract Types Sandra Greene BUS 315 Dr. Lena Maslennikova 10 December, 2012 Federal Contracting Activities and Contract Types This paper will discuss Booz Allen Hamilton. It will briefly discuss its history and then go into who they are today. Finally, it will cover a major contract that they have recently acquired along with a few particulars of that contract. Edwin G. Booz started his first engineering company after a stint in the navy in 1914. After many changes the firm officially became a management consulting firm called Booz Allen Hamilton in 1942.
Today it is one of the most prestigious technology consulting firms in the world with eighty offices throughout the United States (Booz Allen Hamilton).
Booz Allen Hamilton is provides management and technology consulting services to the United States government and commercial services. Booz Allen’s services include strategic planning, human capital and learning, communications, operational improvement, information technology work, systems engineering, organizational change efforts, modeling and simulation, program management, assurance and resilience, and economic business analysis (Booz Allen Hamilton).
As of August 2008, what was formerly Booz Allen Hamilton’s parent company divided in two. The Booz Allen Hamilton name was retained by the half focusing on U. S. governmental matters, with Booz & Company taking sole control of its commercial strategy and international portfolio. Booz Allen Hamilton is majority owned by a private equity firm called The Carlyle Group, while Booz & Company is owned and operated as a partnership. On November 17, 2010, Booz Allen’s shares of common stock began trading at the New York Stock Exchange (Booz Allen Hamilton).
In 2012 Booz Allen, for short, acquired a major government contract on 22 October, 2012 to provide IT and Telecom-Other IT and Telecommunication (computer system design). It was an open competition contract with two bidders. The contract was for $12,231,376. 42, with a completion date of 22 October, 2014 and the work will be done in Pensacola, Florida (Federal Procurement Data System). The type of contract is a Cost Plus Award Fee (CPAF), which is one type of Cost-reimbursement contract, with a fee that is adjusted based on the contractor’s performance.
With this type of contract a contractor is paid every allowable, allocable, and reasonable cost incurred, plus a fee (incentive award amount) that may be earned (in part or in full) based on the excellence displayed in contract completion time, cost effectiveness, quality of work, and technical ingenuity. The Fee Determining Official (FDO) decides if the award has been earned (Business Dictionary, 2012) (Cost Plus Award Fee Contracts, 2012). CPAF or Cost-reimbursement contracts are used primarily for research and development tasks.
They are used when the costs of performing the tasks cannot be predicted with enough accuracy at the time the contract is signed (Murphy, 2009, p. 24). For instance, it would be difficult to predict with accuracy the costs associated with developing, documenting and revising system design procedures, test procedures, and quality standards for IT systems. A company cannot know what they system needs until it actually starts working on that system and learns the flaws. They cannot know what tests are needed until they work on the system.
They cannot develop programs until they know what programs are needed. Predicting costs for most analyzing tasks are just going to be difficult. This is why a Cost-reimbursement contract is better for those types of tasks, rather than a fixed-cost contract. The contract for Booz Allen will consist of analyzing and designing the computer systems since Booz Allen is a management consulting and analyzing firm. Their job will consist of some or all of the following: • Develop, document and revise system design procedures, test procedures, and quality standards.
• Provide staff and users with assistance solving computer related problems, such as malfunctions and program problems. • Test, maintain, and monitor computer programs and systems, including coordinating the installation of computer programs and systems. • Consult with management to ensure agreement on system principles. • Expand or modify system to serve new purposes or improve work flow (Business Dictionary, 2012). A lot of the work will consist of analyzing, testing, and modifying. This is why a CPAF contract was used instead of a fixed-cost contract because it is difficult to predict actual costs.
A company would put themselves in a bad situation to have a fixed-cost contract if the costs where more than the contracted amount (Murphy, 2009, pp. 24-7). As with any project, there will always be costs or expenses associated. The type of expenses will always depend on the type of work or project. Some expenses that will be associated with this contract are direct and indirect costs. Direct costs are costs that can be totally identified with or traced back to a particular product or service. Those costs are materials, labor, or expenses related to producing the product or service.
Indirect costs are not easily traced back to a particular product or service, or can be involved with other products or services in the same time period. Booz Allen provides services so they will never have material costs associated with any project (Direct Costs, 2012). Some of Booz Allen’s direct costs associated with this project are direct labor, sub-direct labor and direct travel. Direct labor are employees or workers who are directly involved in the production of goods or services. In this case it would be the employees that work directly on the computer systems and conduct analysis of said systems.
Estimating labor costs is pretty simple. It is mainly multiplying the labor cost by the labor hours. Of course, it has to be verified that the labor hours are fair and reasonable by professional analyst (Direct Costing, 2012). Another direct cost would be sub-direct labor. A lot of times the government requires a contractor to bring in a small business sub-contractor to complete a percentage of the work. These small businesses targets can be minority owned, woman owned, veteran owned or another disadvantaged group.
Also, sometimes a company will sub-contract because the government is not paying enough for their own people to do the work, so they hire it out for less of a cost. That sub-contractor will still be directly involved with the project, but they are a sub-group. Therefore, they would be direct labor, but not being an employee of the firm puts them in another direct labor category (U. S. Small Business Administration, 2010). The last direct cost to be discussed is direct travel. A lot of time, if not most, the site of the project will be in location different from the offices of the contractor.
This will require the employees to travel in performance of the contract. Travels of direct labor employees, not to be confused with indirect employees, are direct travel costs. As long as the labor is direct and the travel is for the performance of the contract, it is an allowable cost (Direct Costs, 2012). Some of the Indirect costs associated with this project are indirect labor, indirect travel, and sub-indirect labor. The indirect labor could be supervisors who supervise the work of several projects. The same could be said for sub-indirect labor. The supervisor for the subcontractor could supervise the work for several projects.
Because these supervisors oversee several projects they cannot be charged as a direct labor because direct labor would be for only one particular project. Indirect travel would be the travel that the supervisors took. Keep in mind that travel by supervisors are indirect because supervisor costs are indirect. This has been a brief overview of the history of Booz Allen Hamilton and a major contract that they were awarded recently. It covered the particulars of the contract, along with price. Also covered were some of the direct and indirect costs that could be associated with that particular contract.
References Analyzing Direct Labor Costs. (n. d. ). Retrieved February 26, 2012, from http://www. acq. osd. mil/dpap/cpf/docs/contract_pricing_finance_guide/vol3_ch7. pdf Booz Allen Hamilton. (n. d. ). Retrieved from Booz Allen Hamilton: http://www. boozallen. com/ Business Dictionary. (2012). Retrieved from Cost Plus Award Fee (CPAF) Contract: http://www. businessdictionary. com/definition/cost-plus-award-fee-CPAF-contract. html Contract Lists. (n. d. ). Retrieved from Federal Procurement Data System-Next Generation: https://www. fpds. gov/fpdsng_cms/ Cost Plus Award Fee Contracts.
(2012, September 6). Retrieved from Acquipedia: https://dap. dau. mil/acquipedia/pages/about. aspx Direct Costing. (2012). Retrieved from Accounting Tools: http://www. accountingtools. com/direct-costing Direct Cost . (2012). Retrieved from Investopedia: http://www. investopedia. com/terms/d/directcost. asp#axzz2DY6mVqLp Murphy, J. E. (2009). Guide to Contract Pricing. Virginia: Management Concepts, Inc. U. S. Small Business Administration. (2010). Retrieved from Small Business Jobs Act of 2010: http://www. sba. gov/content/small-business-jobs-act-2010 .
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