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Question No: 1 What Type of Contract Should Be Use For Research and Development (R&D) Projects, Biefly Explain?

The document discusses research and development (R&D) contracts. It states that R&D is important for companies to create new products and services. R&D contracts can take various forms, from simple consultancy agreements to multi-party collaborative agreements. The type of R&D contract used depends on factors like the uncertainty of the scope of work and the need to meet milestones. Cost-plus-incentive-fee contracts provide reimbursement based on actual costs plus an incentive fee that is calculated based on cost performance relative to targets.

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38 views

Question No: 1 What Type of Contract Should Be Use For Research and Development (R&D) Projects, Biefly Explain?

The document discusses research and development (R&D) contracts. It states that R&D is important for companies to create new products and services. R&D contracts can take various forms, from simple consultancy agreements to multi-party collaborative agreements. The type of R&D contract used depends on factors like the uncertainty of the scope of work and the need to meet milestones. Cost-plus-incentive-fee contracts provide reimbursement based on actual costs plus an incentive fee that is calculated based on cost performance relative to targets.

Uploaded by

Ayesha awan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Question No: 1

What type of contract should be use for research and development (R&D)
projects, biefly explain?
Research and development is those actions that company does to create or produce new
innovative products or services. It is the first stage for development process. If a company will
not involve in any R&D program, it will not continue to exist its own behalf. Then companies
have to merger or acquisition with other company to survive. R&D is the one of best
procedure/project through that company can enhance their offerings as well as create innovative
products.
The main reason or objective of contracted R&D programs is to move forward logical and
technological information and be valid or applied that information/awareness to the amount
necessary to attain organization and nationwide goals. Unlike contracts for materials and
services, most R&D contracts are going to toward objectives for which the work or methods
cannot be exactly described in move ahead. The contracting process shall be used to support the
best sources from the scientific and developed community to become involved in the program
and must provide an environment in which the work can be pursued with reasonable flexibility
and minimum managerial load.
An agreement between the organization and an external supplier of a service or equipment is
a contract. To edge misunderstandings and make them more officially obligatory, contracts are
more often than not written documents that describe the obligations of both parties and are
signed by those with authority to represent the interests of the parties.
The contract plan defines the association among the project and the subcontractors (dealer,
salesperson, or collaborator) as well defines a procedure for creation changes in the conformity
to accommodate changes that will happen on the plan. This vary management procedure is like
to the change organization process used with the project agreement with the plan purchaser.
Research and development contracts obtain numerous forms, from simple consultancy or
commissioned development agreements to agreements for mutual research and development
(R&D) linking numerous parties with various knowledge and wellbeing. We have widespread
knowledge in, advising on and negotiating a wide variety of such contracts. Some R&D projects
are completely or partially funded from the community reward and the conditions on which they
are approved out have to obey with the environment upon which the funding is provided.
Selecting the suitable contract kind is the liability of the contracting representative. Though,
since of the significance of technological considerations in R&D, the option of contract type
should be made after obtain the recommendations of scientific workers. Even though the
Government normally prefers fixed-price preparations in contracting, this first choice applies in
R&D contracting only to the amount those goals, objectives, condition, and cost estimates are
enough to allow such a preference. The accuracy with which the goals, performance objectives,
and condition for the job can be distinct will mainly decide the type of contract employed. The
contract type is obliged to be chosen to fit the work necessary.
The contracting plan of the development supports the procurement approach of the project. The
follow are some term or conditions to consider when choosing the kind of contract:

 Uncertainty of the scope of work desirable


 gathering assuming the threat of unexpected expenditure increases
 significance of meeting the scheduled milestone dates
 Need for expected project expenses

Question No: 2
A cost-plus-incentive-fee (CPIF) contract has the following characteristics:
 Sharing ratio: 80/20
 Target cost: $100,000
 Target fee: $12,000
 Maximum fee: $14,000
 Minimum fee: $8,000
How much will the seller be reimbursed if the cost of performing the work is
$130,000?
Solution:
Before to start this question, have must identify or recognize all set terms in this question:
A CPIF contract has a Sharing Ratio. That is 80/20 sharing ratio means that the 80% ratio is for
the buyer, and 20% ratio is for the seller. There is one important point that has to always keep in
mind that ratio must be written in this format: Buyer and Seller Ratio format
Next one point is targeted cost it is the predictable or expected cost of this project.
Next one point is in this question is target fee: It is that fee that seller will obtain. Seller is doing
project for getting or obtain target fee.
After target fee, we have maximum fee: it is the fee that seller will have as benefit or
inducement based on excellent work.
First of all we will find out incentive fee by below given formula that will:
Final Fee = (Target cost – Actual Cost) * Seller’s sharing ratio) + Target fee
By putting all values in this formula we will have answer of incentive fee:

Incentive fee= ((100,000 – $130,000) * 20%) + $12,000

= -30,000*20%+ 12,000

= -6,000+ 12,000

= 6,000

This incentive fee is lesser than the Minimum Fee. So 8,000 will be adjusted upwards to 9,000.

So, if we next calculate, Final reimbursed price, it will:


Reimbursed price = Actual cost + incentive cost
= 130,000 + 9000
= 139,000

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