Question

Hypothesize two examples of circumstances where a company has not met the profit requirements of a government contract. Next, speculate on why these circumstances resulted in a failure to meet the profit requirements of its contract with the federal government. Next, provide one example of a company that has not met the profit requirements of a government contract, and specify the company’s end result.

Answer 1

The profit or price pre-negotiation goals are not automatically representative of the contractor's net income. They instead indicate an element of the possible gross profit that contractors are expecting to receive for the performance of the contract upon deducting the contract costs. This expected gross profit element and the estimate by the Government of the allowable costs for the performance of that contract, together make up the total pre-negotiation objective by the government. Similarly, the actual costs may differ from cost estimates making the profit actual realized profit by the contractors differ with the profit negotiated. Normally this arises due to various factors including efficacy in the contract performance, incurrence of costs unrecognized by the government as allowable. The contract type is also likely to affect the profit outcome. A company named "CGI Technologies and Solutions limited" was selected to deliver a website in the Government Health Care program. The company came to national limelight once the challenges with Government program were realized they are not short term. Following the debut that turned out to be dubious on Oct. 1, it's since been established that the software coding and the basal structure of the website's design are root cause of the problem, it's what prevents Americans from enjoying the government insurance program on health. This project was not subjected to an open and bidding but was however limited to 16 shortlisted companies who had been pre-qualified implement IT business for the government under the Indefinite Delivery and Indefinite Quantity contractual terms. Ultimately CGI's contract was terminated for performance failure as prescribed in Termination for Default guidelines. Termination for default is the provision of the Government to exercise its contractual right to terminate a contract either completely or partly due to an actual or anticipated contractor's failure in the performance of the contracted obligations.How Much Profit Are You Allowed to Make on Government Contract?
by Maggie Ray; Updated September 26, 2017
Many people believe the profit margin for a government contractor exceeds that of private industry, particularly when they consider how much of taxpayers' money lines the coffers of government agencies. Even the U.S. Small Business Administration highlights opportunities for entrepreneurs wanting to break into the federal market -- the agency says that in 2013, the federal government spent almost $100 billion on products and services. In some cases, government contracts become lucrative means of increasing the company’s profitability. In others, regulations dictate the amount of profit allowed. Cost-type government contracts present a higher risk to the agency and require analysis of the profit amount when negotiating costs.