Reference no: EM133237218

Background:

The contract you are assigned to as the contracts administrator calls for the delivery of a product called "The Superwidget". The United States Government (USG) buys thousands of these Superwidgets a year. Several companies manufacture them and competition for Superwidgets is fierce, based on technical innovation, price, and delivery criteria. The Superwidget is manufactured from components, software, and firmware from numerous companies. The final Superwidget usually sells for between $800 and $1200 per unit, based on some special features, warranty, and service. Your contract is a multi-year contract with a base period and several option years, and you are performing in Contract Year One at the moment. Also, there are about 8 to 10 other contracts with other companies for a competing and similar Superwidget.

The Situation:

You are a contracts administrator and you work for the prime contractor.

Let's say your company (the prime contractor) buys a particular subwidget for $100/unit. This subwidget is a critical component of the prime's Superwidget. You have a multi-year subcontract with this subcontractor.

You have just been informed in a monthly status meeting that deliveries of the subwidget will be late for the next 3 to 4 months. After your company completes an analysis, you determine that you do not have sufficient stock of subwidgets to cover the required deliveries to the USG. You will need to notify the USG that deliveries of the Superwidget will also be late.

You check the prime contract: your company may be subjected to damages based on the value of the prime contract. You may also face a potential termination for default. You check the subcontract: The subcontractor's liability is based on values in the subcontract, that is, the price of a subwidget at about a $100/unit level. You also have the right to terminate the subcontractor for default.

Management recognizes that it has the potential for a lot of problems in this situation, which it may not be able to correct for several more months (if you believe in and rely on the subcontractor).

Your boss, the VP of Contracts, asks you to develop some business scenarios, focusing on the contractual and subcontractual issues that may arise.

Required Elements to include in this Scenario Essay - Option 1:

• You are required to identify all the issues the company faces in this scenario.
• You are required to identify all the issues the government faces in this scenario.
• Provide some ideas about resolving these issues and mitigating risks the customer (USG) may face in the near future.
• Provide some ideas about resolving these issues and mitigating risks the company may face in the future.