What does it mean when a contract has high start-up costs indicating unbalanced pricing?

When a contract has high start-up costs that indicate unbalanced pricing, it suggests a potential risk to the Government. High start-up costs often mean that the contractor is front-loading expenses, which could lead to a situation where the price structure favors the contractor disproportionately in the earlier phases of the project. This imbalance can create risks for the Government, particularly if the contractor encounters issues, fails to deliver, or if the project does not proceed as planned.

In scenarios where unbalanced pricing is present, the contractor might secure a larger portion of the payment upfront relative to the expected services delivered in the early stages. This could lead the Government to face financial exposure, as making significant early payments does not guarantee that subsequent work will be completed satisfactorily. Therefore, understanding these dynamics is essential in contract management to mitigate risks and ensure accountability.