Due Diligence and Explanation Research Paper

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Cost Analysis

The author of this brief report shall be analyzing the proposed cost structure that is being negotiated and considered between Good Intentions Technology (GIT) and Federal Watchout Agency (FWA). In question is a Firm Fixed Price Solicitation for the B1-RD surveillance product as sold and made by GIT and extended to FWA. The author has been asked to take the perspective of one of the two parties and look at the projected costs. The costs will be assessed on their face and will also be assessed in terms of what questions and fact-finding could and should be done once negotiations continue at the next meeting. Indeed, the overall structure is fairly straight-forward and figuring out cost structures in advance is advantageous to all parties involved. However, the figures given do lead to some questions and there should indeed be the proper amount of due diligence before agreeing to the cost structure and continuing with the project. While the overall numbers seem pretty straightforward, there are some figures and questions that should be addressed. For each overall part of the proposal, whether it be labor, materials or something else, there will be a summary of what is being put forth and what questions are or might be relevant to the project and whether the costs might need tweaking, or at least explaining.

Analysis

Direct Costs

• The first item on the list is that of direct material. In the case of his project, it would seem that the cost of materials would be about 3.3 million even. Provided that this cost can be justified and is in line with that is being delivered in terms of volume, materials and type of all of the above, there should be no issue with those costs.

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Even so, the costs of the direct materials should be itemized and explained as needed before any final agreement is executed.

• A similar statement can be given for the direct labor. That amount comes in at 2.425 million. It is to be expected that GIT will keep their cards at least somewhat close to the vest in terms of their internal procedures and methods in terms of labor. Even so, the aggregate amount of labor should be justifiable and explainable, lest there be concern about GIT bilking their customers due to inflating the costs of the project. This is not to assume that GIT is doing so. However, blind faith and acceptance of costs are not the norm, at least they shouldn't be. Indeed, GIT should have at least a high-level itemization of what is costing FWA in what amounts so that they can be compared and contrasted against similar projects to ensure that there are no amounts that are out of phase with what is normal and customary for this sort of work (Brown & Mitchell, 1988).

• The items and agenda just mentioned for the direct labor will also need to be done for the subcontractors, and for the same reason. Again, there should be presumption that GIT is engaging in malfeasance but there will need to be some level of detail given as to what is incurring those costs and whether they are in line with what is expected for a project and purchase of this type

• Finally, the direct costs conclude with the "other direct costs". At the very least, an itemization of those costs should be completed so that a full account of where the money spent….....

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