Contract Management – High Cost of Contract Formation

Case Scenario

  • Small, highly successful commercial products manufacturer was awarded a moderate complexity $X.XM, firm-fixed price subcontract under a major U.S. Government prime contract
  • Company owner relied on his long-standing relationship with a trustworthy outside general counsel for subcontract review
  • Although honest & diligent, outside counsel lacked any Federal contracting/subcontracting experience & required detailed research & analysis of each of 100+ FAR/DFARS clauses incorporated into the subcontract
  • Counsel’s subcontract review & subsequent negotiation with the prime contractor required > 6 mos. & consumed > $125K legal fees
  • Since price was already agreed during the proposal phase, the legal fees were an unexpected direct hit to the company’s profit

PACFED’s Solution:

  • Competent Federal Contracts Manager with in-depth knowledge of FAR/DFARS & prime contract requirements would be assigned to furnish proposal development, subcontract review & negotiation assistance
  • PACFED’s Contract Manager would have provided the company with a reliable estimate of the time & resources required for post award subcontract review, negotiation & definitization/execution for inclusion in the price offer
  • Approximate timeline:

1 week for proposal consultation
1 week for subcontract review & comment to prime
1 week for negotiation w/prime
3 days final writing/review
2 days final execution
Total timeline: 4 weeks

  • Approximate cost to client: < $25K cost to the company
  • All contracts management expenses recovered via adequate pricing – zero unexpected profit reduction