Gd Contract Federal Contacts Play a Very

GD Contract

Federal contacts play a very large and important role in the economic sectors of our society. Knowledge about these contracts can assist students in learning about the processes that occupy most of the nation's economic resources. Military spending provides the bulk of all federal government spending and most of this money is processed through contracts.

The purpose of this essay is to examine General Dynamics Corporation and give an account of a recent contract they were awarded. This essay will also investigate the type of contract of this discussion and explain some specific qualities of that particular type of contract.

The essay will also discuss some of the costs of this contract, both direct and indirect, to help contextualize the contract from the contractors point-of-view.

General Dynamics

General Dynamics is one of largest government contractors operating in today's business world. According to their website their corporate overview statement proclaims "General Dynamics is a market leader in business aviation; combat vehicles, weapons systems and munitions; shipbuilding and marine systems; and mission-critical information systems and technology." This company was formed in 1952 when two separate organizations, The Electric Boat Company and Consolidated Vultee merged together. Currently General Dynamic enjoyed $32 billion in revenues in 2011 and employ almost 100,000 workers.

The company is divided into four business groups which helps manage this extremely diverse and powerful organization. The four regions include; Aerospace, Combat Systems, Information Systems And Technology and Marine Systems. The company tries to acheive a balanced approach to their strategy by giving each group enough flexibility to make important and decentralized decisions.

The Contract

A recent news release dated 27 Feb, 2013 posted on General Dynamic's website announced that a new contract had been awarded. This contract was awarded to General Dynamics Armament and Technological Products division for $224 for the production and maintenance of Hydra-70 air to ground rockets. According to the press release, " The Army Contracting Command in Redstone Arsenal, Ala., awarded the contracts. Final deliveries under this order are expected to be completed in early 2015. General Dynamics has been the system integrator for the production of Hydra rockets since 1996. The Army orders Hydra rockets for all branches of the U.S. military and select allies."

This contract is an essentially a renewal of an agreement to produce a product that has been in production for some time that the federal government still needs and desires. Vaughn (2010) reported on this issue and declared that "The Army's requirements for Hydra-70 rockets can vary annually. Most recently, it has contributed in the conflicts in Iraq and Afghanistan. The system consists of a standard rocket motor that can be fitted with a variety of warheads including high explosive, flechettes, both infrared and visible light flares, as well as a light weight launcher. A non-explosive round is available for training purposes as well." This contract due to its size was conducted on a very formal bidding process in which General Dynamics has won many times before.

Fixed-Price Contract

"General Dynamics has supplied Hydra rockets to U.S. war fighters and to several of the nation's closest allies for more than 15 years," said Steve Elgin, vice president and general manager of Armament Systems for General Dynamics Armament and Technical Products. "Our long-held experience in managing the Hydra program allows us to work closely with the Army to deliver a weapon that is affordably built and dependable in action." This fixed price contract is so because both the government and General Dynamics entered an agreement on the cost to produce a specific and finite amount of rockets. Another reason this type of contract was used was to maximize the amount of the contract. Fixed price contracts are usually higher in cost due to the inherent risk in providing a unchangeable cost.

Fixed price contracts at the federal level do not maximize the profitability of the tax dollars that go towards these types of contracts. Rocket production provides as steady source of good paying job for the communities that employ these workers, but it seems that this limited population would be better off without these types of weapons deals. A fixed contract benefits both parties by having market changes be not influential towards their production schemes.

Direct Costs Incurred by General Dynamics

Although this project has been implemented and successfully completed many times before in the past, there is still a reoccurrence of direct costs that are affiliated with General Dynamic's new contract. Direct costs usually refer to labor, materials and other costs related to the production of a product. In this case General Dynamic will have to deal with the costs of hiring new workers and the direct costs of their salary. Other benefits included in these workers' pay packages will also count towards their direct costs.

Before assembling these rockets, many new materials must be acquired. These raw materials include sensitive, weapons-grade materials that are very expensive to produce and require special security clearances to handle and manufacture. Any new machinery that may need to be purchased as new capitol may also be included in this list of direct costs for General Dynamics new contract.

Indirect Costs

Indirect costs involved with this project are much more unpredictable and harder to identify. Indirect costs are more or less just a different way to define your project and the ultimate objectives. In some instances a direct cost and indirect cost are indecipherable but require an understanding of the point-of-view to indicate some directional input about the problem.