Contract Selection
Choose a project with a relatively simple description (building a LAN, designing a web page, inventing a new communication device, etc.). Which type of contract structure (Fixed total price, Fixed unit price, Fixed price with incentive, Fixed fee with price adjustment) and what procurement documents (Request for Proposal, Invitation for Bid, Request for Quotation/Proposal) would you recommend for this project and why?
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• Choose a project with a relatively simple description (building a LAN designing a web page inventing a new communication device etc.),
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• Which type of contract structure (Fixed total price Fixed unit price Fixed price with incentive Fixed fee with price adjustment) would you recommend for this project,
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• What procurement documents (Request for Proposal Invitation for Bid Request for Quotation/Proposal) would you recommend for this project,
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• Why would you recommend this type of contract structure,
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• Why would you recommend these procurement documents
Comprehensive General Answer
A suitable project example for this assignment is building a Local Area Network (LAN) for a small office with approximately 30 users. The project scope includes installing network cabling, switches, wireless access points, and testing for connectivity and performance. The requirements are clear, standardized technologies are used, and the work can be estimated with reasonable accuracy.
For this type of project, the best contract structure would be a Fixed Total Price contract. This contract type sets a predetermined cost for the entire project and is ideal when the scope, schedule, and deliverables are well-defined. Building a LAN has predictable labor and equipment needs, so the vendor can provide accurate pricing before the project begins. This also puts more financial responsibility on the contractor while protecting the buyer from cost overruns.
The most appropriate procurement document for this type of project would be an Invitation for Bid (IFB). An IFB is used when the buyer has clearly defined requirements and the selection decision is primarily based on price rather than vendor creativity or complex solution proposals. Since network installation follows known standards such as Ethernet, structured cabling categories, and placement guidelines, detailed specifications can be provided in advance, and vendors can price competitively.
Alternatively, a Request for Quotation (RFQ) could also be suitable if the buyer needs specific price quotes on individual components and labor services. However, the IFB is often preferred when awarding a complete turnkey installation based on lowest bid.
In summary, the LAN project’s defined scope, fixed deliverables, and reliance on standard materials make a Fixed Total Price contract both low-risk and cost-effective for the buyer. The Invitation for Bid approach supports competitive pricing while ensuring vendors meet required technical specifications.