It's About Time! The Journyx Blog

Pitfall! Or The Importance of Understanding the Contract

Posted by Christa Freeland on 1/23/12 3:11 PM

Pitfall! Or The Importance of Understanding the ContractGuess what? Gaining a contract with the defense industry is indeed a lucrative process. At least, it is when the business who wins the contract understands all of its terms. One of the most important terms to determine, especially at the outset, is what it means to have a fixed price contract. Sometimes, a business will overestimate its ability to deliver on a project, possibly because they are used to acting as “yes men” for their standard customers, promising they will deliver just about anything the customer wants and opting to iron out the details later. However, the federal government is not a standard customer, and if you say yes to them, you should be able to deliver.

The truth is, the contracting agency will adhere rigidly to the terms of the contract. If they allocate a certain amount of money for the completion of a project on a fixed price contract, that is all the money that the agency will spend. If a business takes on a project that’s out of its league, it’s quite possible to lose money. Therefore, an understanding of all your businesses processes, particularly related to available resources and time to completion, is absolutely necessary before attempting to win the contract.

Of course, even if you don’t have the ability to tackle a project due to resource requirements that are a bit out of reach, the story doesn’t end there. It is still possible to team with other aspiring contractors, or even to act as a subcontractor. The point is, without a firm grasp on the logistics and assets of your business, you might either undersell or oversell yourself, and thus miss out on the optimum profit potential of your government contract.

Topics: Business Tips

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Our passion for time and expense tracking, project accounting, helping companies know their costs and improve profitability, and motivating people all over the world to invest their time wisely knows no bounds. Join us on our journey as we sift through these fascinating topics and more.

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