Reimbursable Costs and Contract Disputes

In: Business and Management

Submitted By Yosmati
Words 712
Pages 3
Reimbursable Costs and Contract Disputes Cost-Reimbursement contract is a contract where a contractor is paid for all of its allowed expenses to a set limit, plus additional payment to allow for a profit. Cost-reimbursement contracts contrast with a fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses. Federal agencies choose among three contract types to procure goods and services: Fixed-Price, Time-and-Materials and Cost-Reimbursement. Each contract type has a different level of cost or performance risk to the government. They can be used to motivate contractor’s efforts and discourage contractor inefficiency and waste.
The cost-reimbursement contract is considered high risk for the government because of the potential for cost escalation and because the government pays a contractor’s costs of performance regardless of whether the work is completed. The government uses the cost-reimbursement method only when it’s suitable when the cost of the work to be done cannot be estimated with sufficient accuracy to use any type of fixed-price contract.
It appears cost-reimbursement has issues that can be for or against the contractor such as the case with Boeing. Boeing Co is the US Air Forces biggest client. Boeing is suing the US Air Force for $385 million it says the US owes them for the Delta IV Rocket Launch services. Boeing, United Launch Alliance and Lockheed Martin Corp filed a joint compliant in June 2012. They feel they need to preserve their right to recover these costs. They feel these are legitimate allowable costs of the Delta IV program that Boeing incurred prior to the creation of United Launch Alliance. The suit goes back between the 90”s to 2006, when the Pentagon launched Evolved Expendable Launch Vehicle program. Boeing claims the Air Force had agreed to reimburse the costs at issue as…...

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