Procurement Contracts: Fixed Price vs. Cost Plus

Bajari, Patrick; Tadelis, Steven

doi:10.2139/ssrn.156470

Cited by 7 publications

(6 citation statements)

References 8 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The risks of outsourcing through bundled services contracts are identified in the contracting literature. Most prominent are the "lock-in risk" and the concept of "diseconomies of scope" (Bajari & Tadelis, 1999;Brown, Potoski & Van Slyke, 2009;Rawley & Simcoe, 2010). Also, we argue that some risks associated with single service contracts, such as those associated with the termination of a contract or with the distance between the service consumers and government officials, can be heightened in a bundled service context.…”

Section: Introductionmentioning

confidence: 88%

“…Contract elements that lay out strategies for negotiating additions or subtractions from the contract as the need for services change over time. This is similar to the "cost plus" contract designs used in the construction management context to address the risk inclement weather increasing projects' cost and time (Bajari & Tadelis, 1999).…”

Section: Contract Designmentioning

confidence: 95%

See 1 more Smart Citation

Complex products and comprehensive service agreements: A case study of outsourcing in contract cities

Brien¹,

Hine

2015

Journal of Public Procurement

View full text Add to dashboard Cite

This study investigates how outsourcing multiple public functions in a single contract increases the complexity of the services rendered under the agreement. We hypothesize that product complexity arises in these bundled service agreements due to several factors including diseconomies of scope, the 'lock-in' problem, and communications problems between the contractor, the government and the public. We investigate these questions using a textual analysis research methodology to examine the initial contract documents that formalized an agreement between the City of Sandy Springs Georgia and the firm CH2M Hill. The results of this qualitative study identified several ways that different combinations of functions increased product complexity. It also revealed ways the contracts were designed to mitigate the risks of outsourcing multiple functions in a single contract.

show abstract

Section: Introductionmentioning

confidence: 88%

Section: Contract Designmentioning

confidence: 95%

Complex products and comprehensive service agreements: A case study of outsourcing in contract cities

Brien¹,

Hine

2015

Journal of Public Procurement

View full text Add to dashboard Cite

show abstract

“…Loeb and Surysekar (1998), mention that a cost-plus-fi xed-fee contract specifi es that the purchaser reimburse the supplier for the actual costs of executing the contract plus a fi xed fee. Bajari and Tadelis (1999) say that in the fi xed-price contracts, the buyer offers the seller a pre-specifi ed fi xed price for each type of service. According to Auguste et al (2000), in gainsharing contracts, the parties agree on the baseline cost of providing a service.…”

Section: Pricing In Outsourcing Relationshipsmentioning

confidence: 99%

How to measure gain-sharing in an outsourcing relationship: a case study in information technology environment

Agrawal

Guerreiro

Pereira

2005

Rev. contab. finanç.

View full text Add to dashboard Cite

This study aims to approach the issue of gain-sharing measurement in an information technology outsourcing relationship as a component of remuneration policies for contracted services among companies. The methodology encompass three steps: (i) bibliographical revision on outsourcing relationship in information technology environment and pricing in outsourcing decisions; (ii) a case study in which the problem of gain-sharing measurement emerges in the relationship (providing information technology services) between two large-scale international companies that operate in Brazilian credit card market; (iii) discussion of the findings of the case study on basis of the revised literature. The contributions of the paper are: (i) to identify the main issues related to outsourcing decisions and pricing in outsourcing relationship; (ii) to present a description of the characteristics and behavior of costs in information technology environment; and (iii) to provide an analysis and discussion about the method adopted by the companies for gain-sharing measurement. The bibliographical research showed a lack of literature regarding to the specific subject of gain-sharing measurement. The findings of the empirical study indicated that information technology companies are highly structured with fixed costs and that gain-sharing method adopted by studied companies corresponds to costs savings measured by cost-accounting concepts of price and efficiency cost variances according to budget parameters. In addiction, it was observed that the method adopted contributes to get more transparency and capability to analyze the business relationship by both receiver and provider companies.
Este estudo tem o objetivo de analisar o problema da mensuração do gain-sharing na terceirização de serviços de tecnologia da informação como um componente da política de remuneração dos serviços contratados entre duas organizações. A metodologia adotada compõe-se de três passos: (i) revisão bibliográfica sobre as decisões de terceirização e precificação de serviços terceirizados no ambiente de tecnologia da informação; (ii) um estudo de caso real em que o problema da mensuração do gain-sharing surge no relacionamento entre duas grandes empresas de classe mundial que operam no mercado brasileiro de cartões de crédito; (iii) discussão dos achados do estudo de caso com base na literatura revisada. As principais contribuições deste trabalho são: (i) identificação dos principais problemas relacionados às decisões de terceirização e precificação de serviços terceirizados; (ii) descrição das características e do comportamento dos custos no ambiente de tecnologia da informação e (iii) análise e discussão do método adotado pelas empresas estudadas para mensuração do gain-sharing. A pesquisa bibliográfica mostrou uma lacuna na literatura relacionada especificamente à mensuração do gain-sharing. Os achados do estudo de caso indicaram que empresas de tecnologia de informação são altamente estruturadas com custos fixos e que o método de divisão de ganhos adotados ...

show abstract

“…Fixed-price contracts set compensation on the seller's outputs while cost reimbursement contracts set compensation on inputs, such as time and materials. These terms specify who generally bears cost risk: fixed price contracts place more of the cost risk on sellers and cost plus contracts place more of the risk on buyers(Bajari & Tadelis, 1999).…”

mentioning

confidence: 99%