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Cost Reimbursement Contract Troubles for Small Business Firms

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The adequacy of the contractor’ s accounting system is a type of contracting that requires the accounting system to be adequate and up-to-date to permit a time tracking and reporting thereof of the crucial cost data in such forms as required but the proposed contract type. This factor is so crucial especially when a fixed cost contract requires revision in price when the contract is underway or just when the cost-reimbursement type of contract is being reviewed when all the current and past experience with the contractor has always been on a fixed-cost basis. Cost reimbursement contract is preferable to the big firms as they have the resources in form of the financial capability to and the expertise, therefore, to accomplish all the requirements in a timely manner as compared to the smaller firms with very little financial backing.

The large firms also have the technical capability to handle this type of contract. If the contract period is to cover or go over a long period of time, especially beyond five (5) years, it is necessary that the cost-reimbursement contract is considered as it would be difficult for both the contractor and the contracting companies to establish exact contract value and cover all the contingencies in the performance.

This would be most suitable for large companies. The working relationship is under less stress if both sides do understand the details of the contract they are going into. This kind of contract leaves very little room for argument over the contracting period as the values are very clear. It also dispels any misinterpretation in the likely event that there is a court battle in case the contractor sues to enforce the contract in his or her own understanding. The language of this contract issues controls, to both, the effort and professionalism.

This must be exercised by a contractor while he/she is working under the contract. In this case, it allows small business owners to have a control on how dedicated the contractor would be to both the project as well as the quality of work he/she produces, therefore, I may terminate the contract if I feel that it’ s of low quality and withhold payment too.

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