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Your company has a sole source contract to build a new weapon system for the military. Midway through the contract the government wants to make a significant change to the design to incorporate some new technology. You submit a Change Proposal for the impact – millions of dollars – and negotiations take months. You finally reach a handshake. Prior to signing the mod you receive information that shows your costs will be a couple million dollars less than you thought. Good news, right? What might be some issues?
Congratulations! Your small company was just awarded a lucrative contract to provide hundreds of widgets to the US Government for a total price of $50 million. If you perform well, you’ll be on “easy street” with all the follow-on business. It will take you 6 months to produce and deliver the units. The US Government will not provide up front payments (payments prior to delivery) and, is notoriously late on paying “net 30” invoices.
- What can you do to minimize the negative cash flow of this deal?
- How are you going to keep your company afloat until you get paid?
- Part 32 Contract Financing, Volume 1, page 32.1
- Part 15 Contracting by Negotiation, Volume 1, page 15.1