Award Cycle

The award cycle results in a signed contract. Unfortunately, there are several types of contracts. The negotiation process also includes the selection of the type of contract.

Conclusion: The objective of the award cycle is to negotiate a contract type and price that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economic performance.

There are certain basic elements of most contracts:

• Mutual agreement: There must be an offer and acceptance.

• Consideration: There must be a down payment.

• Contract capability: The contract is binding only if the contractor has the capability to perform the work.

• Legal purpose: The contract must be for a legal purpose.

• Form provided by law: The contract must reflect the contractor's legal obligation, or lack of obligation, to deliver end products.

The two most common contract forms are completion contracts and term contracts.

• Completion contract: The contractor is required to deliver a definitive end product. Upon delivery and formal acceptance by the customer, the contract is considered complete, and final payment can be made.

• Term contract: The contract is required to deliver a specific "level of effort," not an end product. The effort is expressed in woman/man-days (months or years) over a specific period of time using specified personnel skill levels and facilities. When the contracted effort is performed, the contractor is under no further obligation. Final payment is made, irrespective of what is actually accomplished technically.

The final contract is usually referred to as a definitive contract, which follows normal contracting procedures such as the negotiation of all contractual terms, conditions, cost, and schedule prior to initiation of performance. Unfortunately, negotiating the contract and preparing it for signatures may require months of preparation. If the customer needs the work to begin immediately or if long-lead procurement is necessary, then the customer may provide the contractor with a letter contract or letter of intent. The letter contract is a preliminary written instrument authorizing the contractor to begin immediately the manufacture of supplies or the performance of services. The final contract price may be negotiated after performance begins, but the contractor may not exceed the "not to exceed" face value of the contract. The definitive contract must still be negotiated. The type of contract selected is based upon the following:

• Overall degree of cost and schedule risk

• Type and complexity of requirement (technical risk)

• Extent of price competition

• Cost/price analysis

• Urgency of the requirements

• Performance period

• Contractor's responsibility (and risk)

• Contractor's accounting system (is it capable of earned value reporting?)

• Concurrent contracts (will my contract take a back seat to existing work?)

• Extent of subcontracting (how much work will the contractor outsource?)

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

Get My Free Ebook

Post a comment