Federal Contracting Activities and Contract Types - Research Paper Example

?AUDIT ON DRONE TECHNOLOGY COMPANIES Audit on Drone Technology Companies A drone, also referred to as an unmanned aerial vehicle is an aircraft that flies with no human pilot on board. The aircraft may be controlled autonomously using computers or by a pilot on ground. In recent times, there has been a lot of controversy on whether to use or not use such machines in warfare. In 1995, Robert Pepperell coined the term “post human” in the context of convergence of technology and organisms. According to Pepperell, the rise of robot warriors and autonomous unmanned aerial vehicle renders ethics of war a post human phenomenon as the human factor has been removed therein (Enemark, 2014). Many governments nevertheless have continued to use these machines. The Department of Defense plans to issue a $400,000 government contract to a company that specializes in drone navigation technologies. This paper will review two companies Lockheed Martin and Boeing Company. Further, it will determine which of the two should win the contract. In 1916, an idea to build a better airplane was conceived by William Edward Boeing in a boathouse on Seattle’s Lake Union when he assembled a group of expert to bring this dream to life. Today, the Boeing Company is the largest aerospace company in the world manufacturing commercial aircraft, satellites and military aircrafts. With over 145 countries as customers, the company boasts of over fifty billion dollars annual profits (Yenne, 2005). Currently, it is the leading contractor to the US National Aeronautics and Space Administration (NASA). By the turn of the century, the company employed over 150,000 people in over 60 countries. Currently the company is headquartered in Chicago. Boeing Co. brings together five of the most influential corporations in aerospace history. This cooperation includes Hughes space and communication, McDonnell and Douglas, Boeing, North America aviation and North America Rockwell. McDonnell and Douglas had previously merged in 1967 while Hughes space and communication merged with Boeing Co. in 2000. Boeing’s business model is carried out by two major groups, Boeing commercial airplanes and integrated defense systems. The current chairman and CEO of the company is James McNerney. Lockheed Martin is an American security, advanced technology, defense and aerospace company founded in 1995 by the merger of Martin Marietta and Lockheed corporations. In 1996, it acquired Loral corporations. Its headquarters are in Maryland, Washington; currently, the company employees over one hundred thousand people in over five countries. Primarily, the company is involved in research, design, development, manufacture, and sustainability of advanced technology systems. The journey of Lockheed Martin began in 1912 when Glen Martin founded the Glen L. Martin Company. From a rented church building, Glen built his first airplane. In the same year, Malcolm and Alan Lockheed established the Alco Hydro-Aeroplane Company. This company was later renamed the Lockheed Aircraft Company. Malcolm and Alan were competent mechanics who in their garage built seaplanes. Lockheed Martin Corporations grew from a church and a Garage. These were very humble beginnings but the founders were unrelenting and visionary men who saw a better future for their businesses. Lockheed Martin produces a number of aerospace and defense machines. Some of their several unmanned aero vehicles manufactures by Lockheed Martin include, K-max, tracer, stacker UAS, X56A, desert hawk III just to name but a few. In recent times, the Boeing Company has won a number of military contracts from several countries. In 1999, the Boeing Integrated Defense Systems was chosen to design and manufacture unmanned orbital vehicle. Boeing, Nasa and the US air Force jointly funded the project in a span of four years. The project cost was 194 million. In 2013, the Boeing Company in, St. Louis, Missouri was awarded a fifteen million firm-fixed-price contract by the US Navy. The contract was for the preliminary design, review and assessment of the (UCLASS) Unmanned Carrier Launched Airborne Surveillance and Strike Air Vehicle. The objective of the Unmanned Carrier Launched Airborne Surveillance and Strike Air Vehicle system to augment aircraft carrier or air wing operations by providing a responsive, world-wide presence. The system would do this through a sea-based Unmanned Aerial System that is organic with persistent surveillance, intelligence, reconnaissance, targeting, and strike capabilities. The project is to be executed in St. Louis, Missouri. The project is expected to be concluded by mid 2014. The Naval Air Systems Command, Patuxent River, in St Mary’s county Maryland was the contracting authority. The contract was procured noncompetitively. This is pursuant to the FAR 6.302-1(a) (2). Lockheed Martin has also won several contacts in recent times. According to Lockheed Martin’s website, the company planned to develop a new unmanned aero-vehicle carrier combat aircraft by the name Unmanned Carrier Launched Airborne Surveillance and Strike Air Vehicle Sea Ghost (Lockheed Martin, 2013). In this contract Lockheed Martin was the fourth American defense contractor contending for the U.S. Navy’s contract. Other companies were Boeing’s Phantom Ray, General Atomic’s Sea Avenger, and Northrop’s X-47B. Lockheed Martin claimed that the Sea Ghost is a carrier based UAV and includes continual intelligence gathering, light strike combat capability, reconnaissance, and surveillance. All the four companies that bided for this project have since been awarded the contract. This contact was noncompetitively procured in regards to FAR 6.302-1(a) (2). According to Lockheed Martin, the Sea Ghost draws a lot of inspiration from their work in the RQ-170 Sentinel Unmanned Aircraft System (UAS), the Joint Strike Fighter F-35C, and several other Navy projects they have worked on. There are three types of government/ military contracts; they include fixed price, time and material and cost reimbursable. In fixed price contracts the price negotiated at the initiation of the contract remains the same regardless of the cost of the project. In cost reimbursable contracts, the government or the issuing body involved will pay the actual cost of the project at the completion of work. Usually there is some mechanics that allows the contractor to profit from the project. In time and materials contracts, there is an agreed rate for the materials and labor. Both Lockheed Martin and Boeing Company are eligible for Fixed Price contracts. With the price being negotiated before the initiation of the contract both of these firms have experience, finance and skill to fulfill such contracts. The two firms can also work with a cost reimbursable contract. Most of the contracts that such firms have done are mostly of this nature. Since both firms have the financial might to take on big projects, this type of contract is suitable. Though not common the two firms may also work under time and materials type of contract. In this type of contract, the rates will be negotiated beforehand. At the completion of work, the contractor bills based on rates previously agreed upon is paid. A direct cost is a price attributed to the manufacture or production of a particular good or service. Usually, direct cost is associated with cost of labor, materials, and expenses that are related to the manufacture of a specific product. An indirect cost is difficult to allot to a specific product. Examples of indirect cost include administrative expenses, depreciation etc. In the production of navigation systems, the following direct cost are associated. Labor cost, this includes wages, salaries and bonuses paid to the production team. Raw material cost, this includes electronic components, raw materials such as silicon, plastic, glass etc. Indirect cost or expenses in the manufacture of navigation systems include administrative expenses, depreciation, cost on lease hold property or rented premises etc. According to Lockheed Martin proxy report, dated June 26, 2011, the company had a gross expense amounting to over ten billion dollars the company had an overall net earnings of over seven hundred million. Boeing, which is a much bigger company, had overall net earnings of four billion dollars for the same year. The direct costs for both businesses were at par adjusting for the amount of business both companies received. Lockheed Martin had a leaner management team compared to Boeing hence less administrative cost. With less indirect cost, I think, Lockheed Martin would be the best bet for the government contract. Both Lockheed Martin and Boeing Company are reputable company that could fulfill the Department of Defense government contract. Both of these businesses have the necessary personnel, equipment, among other resources necessary for fulfillment of the contract. Based on all the data available, I think that Lockheed Martin should be awarded this contract. Lockheed Martin is involved in security, advanced technology, defense and aerospace. Primarily, the company is involved in research, design, development, manufacture, and sustainability of advanced technology systems for the armed forces and defense installation. Boeing on the other hand is not entirely military, security or defense oriented. For this reason I think Lockheed Martin would be the best company to win this contract due to its defense and security specialization. Lockheed Martin has a leaner indirect cost due to its thin management team. With a smaller management team, their overall spending on management is low. Boeing on the other hand is a bigger company with a massive management/ administrative team. This argument the overall cost of production to be hire. The cost of production is ultimately passed down to the customer. That said, I think that Lockheed Martin, would be the best choice owing to the fact that the overall operation cost is minimal hence the customer would pay less. Lastly, both Boeing and Lockheed Martin have an equal level of experience dealing with military installations. On the downside, Boeing is a much bigger company compared to Lockheed Martin and as such may take a longer time in delivery and execution of the contract therein due to administration bureaucracy. Lockheed Martin which is learner may not be affected such a bureaucracy. Reference About Lockheed Martin. Retrieved from < http://www.lockheedmartin.com/us.html> Enemark, C. (2014). Armed drones and the ethics of war: Military virtue in a post-heroic age. Military contract. Retrieved from Yenne, B. (2005). The story of the Boeing company. St. Paul, MN: Zenith Press. Read More