Cost Recovery in Commercial Item Contracts
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Authors
Tharp, Greg
Subjects
Advisors
Date of Issue
2021-05-10
Date
05/10/21
Publisher
Monterey, California. Naval Postgraduate School
Language
Abstract
Purpose: For uniformity, present value methodologies and clauses are needed. Design: Based on a review of literature, FASB Concept Statement No. 7, and the FAR; a way to calculate present value of commercial item contracts is identified as well as present value clauses. Findings: Commercial items involving an uncertain degree of risk and dynamic costs use a fuzzy net cash flow methodology, forming basis of net present value, to calculate cash flow in order account for risk and changing costs. Clauses should be inserted into commercial item contracts to allow for greater clarity as to how present value is calculated with certainty. Practical Implications: No method to calculate the present value of recovery of cost of work performed prior to termination in commercial contracts exists. Present value clauses and methods are consistent with the intention of framers of the FAR. Originality/Value: Due to lack of a current methodology to calculate the present value of commercial item contracts, FASB Concept Statement No. 7, present value, and fuzzy net cash flow are used to calculate present value of commercial items.
Type
Presentation
Description
Series/Report No
Department
Organization
Identifiers
NPS Report Number
SYM-AM-21-110
Sponsors
Prepared for the Naval Postgraduate School, Monterey, CA 93943.
Naval Postgraduate School
Naval Postgraduate School
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Citation
Distribution Statement
Approved for public release; distribution is unlimited.
Approved for public release; distribution is unlimited.
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.