Open communication to John Bourque and fellow investors. Maybe you already know all of this but I thought I would pass on the results of experience. I included investors in this communication because it should not compromise any of Bourque Industries strategies but gives glimpse into some of the considerations necessary to take a product to the DoD market place and still make a profit.
After all the "discussion" about patents, performance, production, certification, and all the other tidbits, there is one thing I would plead with you to trust me on: DON'T TRUST THE GOVERNMENT CONTRACTS PEOPLE. If it is not in writing, and signed by both parties, it doesn't exist.
One of the most valuable assets of Bourque Industries is Intellectual Property (IP).
It is imperative that Bourque Industries carefully and meticulously document not only what the IP is, but all of the Bourque funds spent on development and the development timeline. This needs to be done before you accept a government contact that has any funding for development/product changes. You will need this later down the road as a basis for really good profits.
The customer will ask you to develop a data package for your product and they usually pay for this. Since they paid for it they own it! Any changes or development of enhancements to the Bourque product they will gladly pay for - then they own it. Each time they pay for development, if it involves IP, BORK/our portion of the IP shrinks. And, keep Bourque proprietary processes out of the data package. If you have to give in anywhere get something in return. There is no free lunch in government contracting. There is always an "honest Abe" can where visitors are expected to deposit the value of their lunch.
This IP stuff becomes important in two major areas: first when you negotiate price, make sure there is a license for use of the IP that you get paid for. This is not part of the profit dollars but a license fee. Second is when the government wants a second source for Bourque products. It could be in the US or foreign. They horse trade this kind of stuff all the time in the "offset game". This second sourcing happens down the road and hopefully you will have all your IP documentation and will have maintained clean Bourque funds to maintain the IP. Any second source will have to obtain and pay for a license from Bourque Industries. Don't neglect this - you can't fix it later. If Bourque Industries blows this, the government can and will take "their" data package and compete it on the open market!
If it goes to a second source, then you are entitled to royalties/license fees for use of Bourque IP as part of the data package as long as you can prove ownership and its' value. In some cases you can make more profit off of each item sold by the second source than you can make on your own production. Even the big boys have screwed this up on $500M+ programs. License fees can be a great revenue stream.
And last, watch out for the "letter contract". For a new company it is enticing to get the government money flowing quickly, but if you accept the letter contract you give up a significant part of your negotiation advantage. The negotiation will drag on and on because the customer is already getting what he wants.
So, investors, sometimes it takes significant time to get the right contract in place. This is all done behind the scenes and NO, you will not know when or what is going on. You see it as Bourque dragging his feet because you are looking only at your share price that is not going up as fast as you would like. If you pride yourself in doing DD then understand that Bourque also has to do his DD and it is much tougher than yours. Live with it - this is how the business works.
When Bourque and company go into the lions' den they can expect the lions to look like foxes - well dressed, smiling, and telling you they are there to help you. The foxes can't legally buy your lunch, you can't legally buy their lunch but it perfectly legal for the foxes, after lunch, to take away your lunch money for tomorrow in negotiations.
Disclaimer: All of the above material is contained in the public domain except for the screw ups which are never in the public domain. I am not a lawyer and any information contained herein is not to be construed as legal advice but only a voice of experience.
