Advantages of Hybrid Contracts
Hybrid contracts are also known as Mentor-Protégé agreements and they are especially endorsed when it comes to government agency dealings with small business enterprises (Kalnins and Mayer, 2004). This is because this type of contract has benefits that can be realized by both parties in the event that they engage in business dealings. For the owner of a small business, hybrid contracts are important because they increase the chances of the enterprise being picked in a sealed bidding process. The second advantage that hybrid contracts will offer the owner of a small business is the fact that these contracts are based on selected elements from other more rigid contract types. As a result, they offer a great deal of flexibility thus giving the small business some level of breathing space rather than piling unnecessary pressure on the enterprise. This allows the business owner to meet his or her obligations in a satisfactory manner. The third advantage of hybrid contracts for small business is the increased opportunity for growth given the fact that these contracts encourage consultative decision making processes even post-agreement.
For the government agency such as the Navy, this contract will make it much easier for orders that had been made to be fine-tuned so as to better meet the needs that this military wing may have. Another advantage of hybrid contracts for the navy is the flexibility element and this means that it can easily be adjusted to suit unplanned for eventualities such as increments in price increments, shortages and emergency situations among other circumstances. Another big time advantage of hybrid contracts is the provision that they have for the reimbursement of the navy for its role in facilitating some transactions thus leading to financial savings.
A small business stands to benefit in several ways from the use of micro-purchases by a small navy base that is located in its vicinity. Micro purchases are basically financial transactions that fall below 3000 dollars and this price range is generally applicable to daily expenditure by a government agency (Schooner and Whiteman, 2002). This then leads to the first advantage which is that these transactions tend to be recurrent and this ensures a steady flow of income to the small business’ accounts. The micro purchase system basically mirrors credit card transactions as carried out in the market and all that is required for the small business is the ability and machinery to conduct such transactions. This provision was created to reduce the need for endless paper work for relatively smaller transactions that government agencies will undertake. What this means for the small business owner is that he or she does not need to worry about bureaucratic processes that businesses are often subjected to in their dealings with government. This means time savings, quicker projections and also faster processing of payments.
The small business will also be saved from intense government scrutiny as is the case with those enterprises that it gets into business dealings with government. Those that have to enter formal contracts have to meet a long list of pre-conditions that at times prove strenuous for the businesses that are involved and this may even limit the enterprises’ productivity. Micro purchases however take place over the counter and this factor can be highly leveraged by the small business which can easily streamline its operations to suit the needs of the navy thus nurturing a healthy business relationship.
Kalnins, A., & Mayer, K. J. (2004). Relationships and hybrid contracts: An analysis of contract choice in information technology. Journal of Law, Economics, and Organization, 20(1), 207-229.
Schooner, S. L., & Whiteman, N. S. (2002). Purchase Cards and Micro-Purchases: Sacrificing Traditional United States Procurement Policies at the Altar of Efficiency. INTERNATIONAL LIBRARY OF CRITICAL WRITINGS IN ECONOMICS, 144, 207-232.
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