Federal Contracting Activities and Contract Types- Dell

Federal Contracting Activities and Contract Types-

Dell Inc.

Dell Inc. was founded by Michael Dell who ventured into business as a freshman at the University of Texas in Austin. He realized that the branded models of computers were expensive and not many could afford them. He ventured into the business of buying the computer parts which he assembled in clones of IBM computers and sold to the consumers directly through the mail. The computer market was already dominated by the big players in the market but against the odds Dell faced competition and emerged the best brand sold through the direct-mail market. Customers recognized the brand through his aggressive marketing and the quality of his computer products that earned him a bigger market share compared to the other little known companies. It became incorporated in 1984 where it has been the world's leading seller of computer systems.

Dell offers a variety of high end electronics for its consumers in the PC market both software and hardware. It has also moved into other consumer electronics and home appliances market where it manufactures high end LED Television sets among others.

The company has maintained the policy of direct selling to its clients through a team of dedicated sales representatives and also online via its interactive website.

The corporation's clients for various products range from small businesses to large businesses, several institutions and government agencies among others. Dell manufactures most of the products it offers to its clients with a big share of the market cutting across several continents and accessing all markets in the world. A bigger percentage of its revenue is generated from the American market which forms two thirds of its sales. The remaining part is shared in different proportions in different markets across the world. (Advameg, 2012).

Dell's quality in the provision of the IT solutions has earned the company a great number of contracts with the federal government supplying various agencies of the government which have different needs. Dell has had a good working relationship with the federal government and has enjoyed more than fifteen years of working experience supplying various agencies with its products and services, where some of its services include; business consulting, IT consulting, managed services and business process among other crucial services to the government.

Contract

One of the major contracts awarded to the company by the Federal government was in the U.S. Citizenship and Immigration Services Bureau. A wholly owned subsidiary Dell Perot Systems won the award which had a total contract value of $120 million. The award expected Dell to process Citizenship and Immigration application at 60 field offices of the U.S. Citizenship and Immigration Services Bureau. This was a contract for three years and as part of the award the contract expected Dell to further provide services in the management of records distribution, file operations, FBI name and finger print checks, oath ceremony scheduling, and file and pending application and petition inventory requirements (Nick Wakeman, 2010).

The type of contract awarded to dell was a fixed price contract. Fixed-price contracts are the contracts which don't have price adjustments by either party. The contract binds the contractor to provide goods and services at the stated predetermined value within a stated period of time. In the case of the federal government the law requires that most of the contracts be fixed-price contracts where the lowest bidder among other bidders who can provide the required services at the predetermined price with the best working history is awarded the contract (Marry Poppendieck and Tom Poppendieck, 2003).

Type of contract

The government has to pick the best type of contact that best suits the area in which it needs the service of the contractor. Most government contracts are sensitive in terms of the nature of the activities being carried out by the government at the interest of the citizen of which cost is a factor to be considered. The citizens have a stake in government spending and prefer lean budgets which have an impact on their taxes. It is therefore upon the government when entering into contracts to go for the best available contract type that protects the government as the customer against the contractor.

It is of great importance that the government considers contracts that do not expose it to various risks that can be costly for the nation in the long run.

Fixed-price contracts are the most preferred in this aspect over the other types of contracts in the sense that it allows the government to have a clear budget on how much it intends to spend on any given project as opposed to other types of contracts where the cost are subject to alterations depending on the price variations or other un foreseen situations that may arise in the course of performance by the contractor.

Fixed-price contracts shift the risks to the contractor which therefore binds the contractor to perform regardless of the situation. It cushions the government against risks which it could have born in the other types of contracts for instance, cost-reimbursement contract which states that the contract is to be a formed within a period of time in which the contractor bears all the costs, computes all the cost for the government to reimburse according to the contract. Cost-reimbursement contracts allow for extra costs mostly the direct costs incurred by the contractor to be included and be paid by the government which is not the case with the fixed-price contracts.

Fixed-price contracts allow the government to have less disputes in the course of contact performance which arises in other types of contracts where the costs are not specific and are expected to be adjusted which may result into disputable costs between the contractor (Dell Inc.) and the Federal government. The contractor may want to include costs which are not allocable in the expenses among other indirect costs which might result into a dispute.

The contractor also knows from the beginning the value of the contract and any losses which may arise as a result of performing the contract do not affect the government.

This type of contract as well favors the contractor in that they are able to control the costs and work within the contractual amount, should the value be overestimated against the actual cost, the contractor becomes the beneficiary. The contractor therefore has to be paid the contract value upon completion of the contract at no extra cost other than the stated amount in the contract even if the costs have exceeded the contract value (University of Wisconsin, 2012).