In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because ________.
A) the government taxes the defense companies at a higher level than that of other public sector companies
B) there is an implicit agreement among defense contractors to "share contracts"
C) all defense contractors have essentially the same cost structure
D) no contractor is willing to assume all the risk of receiving a fixed price for the contract

Question

Quizplus · Accepted Answer

In high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because no contractor is willing to assume all the risk of receiving a fixed price for the contract. This is because the complexity and uncertainty involved in developing new weapons or equipment makes it difficult for contractors to accurately estimate costs and timelines. As a result, cost-plus contracts are often used, where the government pays the contractor for its costs plus a profit margin, rather than a fixed price contract. This allows the contractor to be reimbursed for any unexpected cost overruns or delays.

In Certain High-Cost Defense Contracts Involving New Weapons and Equipment