Types of Contracts and Performance-Based Acquisition, Research Paper Example

Abstract

The project management lifecycle is the lifecycle of a temporary endeavor that provides a good or service.  The entire project requires multiple levels of control, planning and leading of resources to achieve the specific goals and objectives outlined through the scope of the project. The typical lifecycle of a project goes through multiple phases which have specific entry and exit criteria. These phases are initiating, planning, execution, monitoring and controlling then finally closing. The contracting officer is tasked with providing the guidance and project leadership for the procurement function of the project.  In order to fully understand the impact of procurement management it is imperative to understand where procurement activities reside as well as their impact throughout the project lifecycle.

Negotiations and Types of Contracts

Building a project plan incorporates all three key areas of a project including, schedule, cost and quality.  All three of the constraints play pivotal roles in the successful completion of the project (Dobson 2004).  With project management the requirements of the project define the scope, schedule and cost of the project.  With the requirements defined the project manager can utilize the tools and techniques of the project management best practices to successfully manage a project and complete it on time, on budget and provide the deliverables the stakeholders required. To understand the specific requirements the scope must be understood and outline the major deliverables. From those deliverables the specific requirements or system specifications can be outlined. The scope of this project implementation includes procuring vehicles to facilitate the capabilities of the U.S. Department of Homeland Security, Customs and Border Protection.  The procurement itself has an allocation of two million dollars but there are specific guidelines and requirements for these vehicles.  Due to the nature of the vehicle needs there is also consideration for the type of procurement, sustainment and contract required for the vehicles.  The initial purchase, maintenance, warranty and vehicle disposition will need to be taken into consideration for this project.  The implementation plan requires specific project deliverables as well. The larger the project, the more imperative it is to clearly define the scope of the project (Kanaracus, 2012).  The scope includes more than just buying new vehicles. The extreme nature of the use of the vehicles will be a determining factor to the type of contract entered into by the project team.

The procurement management activities are vital to the success of this project.  The procurement process will determine which goods or services are wither purchased from an outside entity or provided internally by company resources.  Once a decision is made to either “make or buy” the product or service there are other areas that the project manager responsible for the procurement management portion of the project.  In this effort, the vehicles are going to be purchased or leased from a reputable vendor.  The process will include vendor selection process, proposal management, contract negotiation, and contract award (Turner, 2003). There are multiple decision points that occur from the outputs of other portions of the project management methodology. The procurement management process takes the outputs of the initiation phase, such as the project definition, requirements and project charter (Cooper, Grey, Raymond & Walker, 2005).  The project lifecycle’s phases build off of each other so that each section supports critical decisions that will be made in latter parts of the project.  Understanding the requirements that were built in the beginning of the project will allow the procurement manager to communicate the needs of the business to the suppliers.  The procurement process will integrate into the rest of the project due to the simple fact that the outputs and work effort that was performed in the initiation phase directly correlates to the inputs needed to perform the procurement functions.  Once the procurement functions are completed this will result in a need for management and controlling of both internal work efforts and supplier product or service quality and delivery (Project Management Institute, 2008).  The management and controlling phase is the next phase of the project lifecycle and requires the outputs and actions of the procurement manager in order to obtain the goals and objects set forth for the project.

The contract negotiations and vendor selection require clearly defined requirements, understood deliverables and relationship management on the part of the procurement project manager. Contract negotiation and selection require skill and finesse to create the perfect balance between cost, quality and schedule.  In order to negotiate the right contract the initial contract type needs to be selected.  In this project we would drive toward a firm fixed price contract or possibly a fixed price with an incentive fee.  The fixed price contract basically states the total amount of resources we are spending for a given set of requirements. The responsibility falls directly on the government to clearly define the requirements and the seller for understanding the statement of work provided. The risk is put on the contractor if their product does not fully meet the defined requirements. The advantage for a fixed price contract is that the cost is known from the very beginning.  The major disadvantage is as the project moves forward if costs start to exceed the contractor’s profit threshold they may take actions that are not in the best interest of the government. If the risk is too high for the contractor on this type of contract there is another option to limit some risk on both sides. These types of contracts are called Time and Material. This contract type is used when the level of effort to accomplish the tasks or requirements is unknown and the contract duration is brief.  The down side is that the contractor does not have an incentive to control costs.  This is a good choice when you are hiring people to fulfill a certain need.  In this case, the vehicle purchase is the known factor and the vehicle maintenance and repair is the unknown variable.

The multiple types of contracts allow for a greater ability to limit risk and drive cost down.  By limiting risk to the government the contractor will assume more risk and ultimately require more financial reciprocation.  When gathering the bids there are also options for the type of Requests for Proposals (RFP) which include sealed and open bids.  The benefits of the sealed bid are that each contractor does not know the full extent of support, monetary considerations or the other details of the bid.  The cons include the limitation of the competitive nature and effects contractor knowledge can have on increasing the terms of the contract or lowering costs. With this type of procurement, there are certain expectations required by the government in terms of performance.  The performance based acquisition requires a specific amount of fulfillment by the contractor. This includes providing the vehicles, scheduled and unscheduled maintenance and repair and vehicle disposition. These variables in the contract will need to be highly detailed in order to adequately fulfill the contract obligations. It is the contracting officer’s responsibility to monitor and control this aspect of the contract lifecycle.

In order to meet the requirements of the project there must be a clear understanding of the key performance metrics, requirements and the desired end state expected by the Department of Systems Agency.  There also should be a clear and distinct factor or factors that provide that level of separation between this organization and that of its competitors.  The competitive advantage offered by this organization is the purpose driven tactics and the strategic intent for fulfilling the contract effectively and efficiently not only for the guaranteed one year opportunity but for the entire five year term of the proposal.

The requirements of the project include:

• Provide a fleet of off-road capable vehicles
• Provide maintenance for vehicles
• Fluids and sustainment work
• Tires (not included)-normal wear and tear
• Access to maintenance and repair
• Repairs to drive-train
• Meet Service Level Agreements for repair and Return to Service

Each one of these requirements includes a breadth and depth of knowledge not only in the DoD but also off-road vehicle support and maintenance. The goals of the project are to meet the desired quality standards set forth by the customer and to meet the expectations of those quality standards.  To ensure that expectations are established and set prior to the project award, my organization took the additional forethought and requested a detailed listing of each requirement and walked through the details with the program manager listed on the solicitation. This level of detail and purpose driven actions can be expected throughout the life cycle of the project.

References

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons

Dobson, M. (2004). The triple constraints in project management. Vienna, VA: ManagementConcepts.

Kanaracus, C. (2012). Survey finds erp software project overruns ‘distressingly common’. Retrieved from http://www.cio.com/article/710777/Survey_Finds_ERP_Software_Project_Overruns_39_distressingly_Common_39_?taxonomyId=3009

Project Management Institute, P. M. (2008). A guide to the project management body of knowledge. (4th ed.). Newtown Square: Project Management Inst.

Turner, J. (2003). Project contract management and a theory of organization. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=370900