Reference no: EM133576556

Question

Assume that as a negotiator for the Army Electronic Research and Development Command, you are about to place a contract for the development of a prototype model of an electromechanical device. Estimated cost of the development is $120,000, which appears reasonable and is well supported. Costs might vary from that estimate by ten percent or so. You have little doubt about the contractor's ability to succeed in the development. No great advancement of the state-of-the-art is required, nor will any special know-how be developed by the contractor. The contractor has an excellent record of past performance, as do several close competitors for the job; but he has been chosen largely because his location is nearby, since most other factors are about equal, including estimated cost. No financial assistance or property will be required by the contractor. Subcontracting will amount to about twenty percent and will be of a routine nature. A potential follow-on contract may amount to $2,000,000, which would probably be awarded to the developer. The contractor has almost always been awarded fees of seven percent on past jobs, which were generally similar in scope, and has proposed a fee of $9,000 for this contract.