Evaluating Contracts Essay Example | Topics and Well Written Essays - 1500 words

Evaluating Contracts - Essay Example ract on the other hand is one whereby the government compensates the contractor for the total admissible costs that are incurred during the implementation of the contract. Such contracts are normally used for purposes of study as well as progression, especially with non-profit corporations. The contractor stands to gain nothing in this kind of contract (Shealey, 1938). Fixed price contracts have both advantages and disadvantages for the supplier. For the service provider, the contract means he or she is able to tell how much they are to be reimbursed for their services. The contractor does not have to be concerned about the changing elements or quibble with the customer about the cost of materials. Elements as well as prices are set prior to the commencement of the job. Another benefit is that, while the contractor risks facing costs that higher than anticipated, it also is not compulsory for it to miscue savings if the costs prove otherwise. Dealing with such contracts enables the purveyor gain a lot of practical experience with the sort of contracts that potential clientele e.g. the government would prefer. A disadvantage with these agreements is that a lot of the financial risk is placed on the service provider than the client. After the pact has been put in place with a steady permanent price, the client is under no obligation to cover or pay higher costs. A cost reimbursement agreement has its perks and pitfalls as well. These contracts are time and again used when long term worth is of greater vitality than cost. As opposed to the fixed price contract, here, the service provider has very little reason to cut edges. The end cost could be less than the fixed price contract since the contractor is not gratified to inflate prices so as to cover hazards. Conversely, the contract does not provide sufficient certainty as to what the final cost will be. There is not as much of incentive as there is in the other type of agreement. Additional management and oversight