The Background and History of the Companies Contending for the Government Contract

Navigator Inc. is a company dealing with Information Technology. It focuses on employing technology to solve the relevant issues in society. For instance, it has protected the beaches from sharks. The drones trail the sharks to ensure the swimmers are not bitten improving their enjoyment. Also, the drones made at Navigator Inc. solve the issue of global warming. They analyse and map the scorched areas, and measure the biodiversity and nutrients of the place to help them drop seeds to hearten reforestation. It has operated for five years making it feature among the start-up companies. Nonetheless, it has grown positively as it has won one of the major government contracts. It delivered efficiently the electrically tethered drones to the Department of Defense. It has fifty employees mainly the technologists including robotic researchers. Many people praise Navigator Inc. because it helps the state to develop economically by employing many people. The management has been successful because it upholds accountability and transparency. They empower, motivate, and delegate duties to their employees. Consequently, they get motivated leading to the companys success. Also, efficient models of business have been employed lowering the costs of operation. As such, its products are friendly to the environment and are produced at a low cost.

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VectorCal on the other hand, is a well-known company in the Information Technology industry. It has been functional for fifteen years, and has been the leader in IT with a good reputation. As such, it has a strategic position in the market, resulting from its broad networks of partnering with companies in the industry. Furthermore, it uses its position to acquire beneficial contracts. For example, it won the government contract to supply helicopter drones to surveille and control the countrys borders. Concerning profitability, it has obtained persistent profits since its foundation fifteen years ago. Therefore, the management has a good model of business, which enables it to uphold its main goals.

The Latest Key Contracts Granted to Both Companies

Navigator Inc. was lately granted a contract by the Department of Defense to supply the electrically tethered drones. As a startup, the contract was important in enabling it to come up with new jobs for the youths. Additionally, it helped the company to widen its scale of operation. This deal was pronounced by the senior officials from the Department, and the Deputy Secretary of Defense. They indicated the reasons why the contract was awarded to Navigator Inc. For instance, it was compliant to each of the bid requirements concerning the materials to be submitted, the attachments required, and the price quotations, which were submitted within the recommended time. Moreover, as a startup, the company had the upper hand in winning the contract because there was a program by the government to award small businesses contracts. This was in a bid to help them grow and create more job opportunities. As such, Navigator Inc. was awarded the $500,000 contract to not only supply the electrically tethered drones, but also train the operators of the flights and provide the in-field sustenance packages. The drone aimed at conducting reconnaissance, intelligence, and surveillance applications, which back the double sensor Electro- Infrared/Optical military-grade. It has steady turret-style gimbaled payloads, which give night and daytime video that can be used in any weather situation. The government became an early adopter of the tethered drones. Hence, the deployment experience gained, together with the data was of significance as the Navigator Inc. used it to further its innovation initiatives. The employees and management supported and worked closely with the Department of Defense in ensuring the drones worked efficiently.

Also, VectorCal won a contract from the Department of Homeland Security to supply helicopter drones to surveille and control the countrys borders. The announcement was made by the military advisor and secretary of the Department. It was worth $75,000,000 and involved boundary control operations, pollution monitoring, rescue operations, and the detection of people and drug traffickers and illegal fishers. Also, it was tasked with the supply of the ground crew, mission control systems, and the pilots. VectorCal has operated in the industry for long making it have specialised skills in technology. Hence, the contract was a single source procurement as there were no competitive bids from other companies. Additionally, the company won the contract due to its significant networking abilities with many companies in the technology industry. Moreover, the positive customer feedbacks on its website made it win the trust of Homeland Security Department leading to the award. The helicopter drones were deployed from a ship, and they beamed live videos back with indefinite data according to the instructions. The drones were compactly designed. As such, they could manoeuvre easily and start and land uprightly from both the vessels and the shore.

The Types of Contracts that might be Eligible for Navigator Inc. and VectorCal

Navigator Inc. might be eligible for the Fixed Price Contract with Incentive Firm Target (FPIF). The contract specifies a target profit, target cost, price ceiling, and a profit alteration formula. The contract fee varies according to whether the final cost is below or above the planned cost. However, a ceiling is imposed to ensure the government does not encounter cost overruns. As such, Navigators Inc. will conduct the negotiations of the elements from the start. When the project comes to a conclusion, the final cost will be determined, and the formula will be applied to establish the final price. When the ultimate cost is lower than the target cost, the formula yields a profit higher than the target profit; equally, when final cost is higher than the target cost, the formula gives a final profit lower than the target profit, or a net loss. Moreover, if the finally discussed cost surpasses the maximum price, the contractor absorbs the variance as a loss. Since the profit varies contrariwise with the cost, the contract offers a positive, calculable profit inducement for the contractor to regulate costs. As a contractor, Navigator Inc. will be able to determine its share of risk through the FPIF. Also, its accounting system will adequately provide data, which is significant in supporting the negotiation of the contracts final cost and the revision of the incentive price. Moreover, FPIF suits Navigator Inc. as a startup because it will work within its budget despite less industrial knowledge (Smith & Fernandez, 2012). Consequently, the contract will yield a profit as the costs will be monitored to avoid going beyond the targeted cost.

The cost plus fixed fee contract might be suitable for VectorCal as it is deemed to obtain the costs incurred plus a predetermined amount. Since this amount remains constant irrespective of the amount used for the purchase of materials, the contract suits VectorCal because it has a high industrial knowledge on how to obtain quality materials cheaply. As a mature business, it is also aware that predicting the cost of a project precisely is impossible. Hence, the cost-reimbursement contract is suitable despite posing some risk to it (Stanberry, 2013). The estimation of the costs to be incurred take place before the commencement of the work. However, the final pricing takes place after the work is completed.

Direct and Indirect Costs Incurred During the Navigation Systems Production

The production of the navigation systems by VectorCal and Navigator Inc. entailed the use of indirect and direct costs. The direct costs included the material, labour, and power consumption costs. Direct labour cost was a sum of $ 110, 000 for Navigator Inc. while VectorCal incurred $5,000,000. They were used in areas with a direct link to the production or provision of a service. It was performed by business operators and skilled workers in the production line of the navigation system. The employees included cutters, welders, equipment operators, engineers, production supervisors, and technicians of equipment. Direct material costs were the costs of the materials which can be identified in the final navigation system. For instance, chipsets, circuit boards, software, cameras, and robots. The total costs for the direct materials were $ 150,000 for Navigator Inc. whereas VectorCal incurred $25,000,000. Lastly, the companies incurred the direct cost of power consumed by the navigation systems. Electricity costs were incurred because the projects could not continue without power. As such, Navigator Inc. incurred $ 100, 000 while VectorCal incurred $10,000,000. On the other hand, indirect costs incurred included the indirect labour, indirect materials, and depreciation of machines. Indirect labour entailed the labour used during administration scenarios, which support trade and production. Salaries to the employees in the administrative positions make the cost to be incurred as they are not involved in the actual production process. The indirect labour cost for Navigator Inc. was a sum of $30,000 while VectorCal incurred $5,000,000. Indirect materials were the costs incurred on the materials that cannot be traced in the navigation systems produced. For example, the office and cleaning supplies, and tools used in the manufacture. It totalled to $5000 in Navigator Inc. while VectorCal incurred $5,000,000. Finally, the depreciation of machinery like the automatic guided vehicle and magnets used in production are indirect costs. They cannot be attributed precisely to the system produced. There was a sum of $5,000 in Navigator Inc. while VectorCal incurred $5,000,000. The data on the costs incurred is significant in deciding the company, which is more eligible to receive the contract as a company with low costs implies good management that handles its costs effectively.

Navigator Inc. Should Be Awarded the Contract

From the data on costs, Navigator Inc. is eligible for the government contract as it was able to manage its costs despite being a startup. It managed to make a profit of $100,000 from the contract, unlike most startups. Hence, awarding it this contract will imply that it will get another opportunity to grow its management skills. Also, giving Navigator Inc. the contract will create more job opportunities as it will explore new markets of new graduates to work for it. Consequently, there will be no cases of unemployment (Reardon, Nicosia & Moore, 2016). Moreover, awarding this company the contract will be consistent with the governments program of helping startup businesses to grow. Finally, this contract should be awarded to Navigator Inc. because it has entered the technological market with new and improved skills that can handle the navigation requirements of the Department of Defense effectively.

References

Reardon, E., Nicosia, N., & Moore, N. (2016). The utilisation of women-owned small businesses in federal contracting (2nd Ed.). Santa Monica, CA: RAND.

Smith, C., & Fernandez, S. (2012). Equity in State Contracting: Examining the Relation between Minority Representation and Federal Procurement Choices. Retrieved 9 June 2017, from http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2009.02113.x/full

Stanberry, S. (2013). Federal contracting made easy, fourth edition (1st Ed.). Tysons Corner, Va.: Management Concepts Press.