When to Use a Firm Fixed Price Contract

(1) provide adequate notification of the intention to purchase, including a clear description of the supplies or services to be provided and the basis on which the selection is made to all contractors offering the supplies or services required under the multiple procurement contract; and description 16.206-1. A fixed-price contract with retroactive price realignment provides for: (a) a fixed maximum price; and (b) Retroactive price revaluation within the upper limit following the conclusion of the contract. 16.206-2 Request. A fixed-price contract with a new retroactive pricing is appropriate for research and development contracts estimated at or below the simplified acquisition threshold, where it is established from the outset that a reasonable and reasonable fixed price cannot be negotiated and the amount and short duration of the service in question make it impracticable to use another type of fixed-price contract. (a) a maximum price is negotiated for the contract at a level corresponding to an appropriate sharing of risks between the contractor; The maximum price set can only be adjusted if necessary due to contractual clauses that provide for an appropriate adjustment or other modification of the contract price in certain circumstances. (b) the contract should be awarded only after negotiation of a settlement price that is as fair and reasonable as the circumstances permit. (c) Since such procurement does not provide an incentive for the contractor to control costs other than the maximum price, the procuring entity should make it clear to the contractor, during the pre-award discussion, that the contractor`s efficiency and ingenuity will be taken into account in the retroactive redefinition of the price. 16.206-3 Restrictions. This type of contract may be used only if: (a) the contract is for research and development and the estimated costs correspond to the simplified procurement threshold or less; (b) the contractor`s accounting system is suitable for pricing; (c) there is reasonable assurance that the price will be reset without delay at the time indicated; and (d) the public procurement officer (or a senior official where required by agency procedures) authorises the use in writing. 16.206-4 Contractual clause.

The Agent will insert clause 52.216-6, Price Revaluation-Retroactive, in invitations and contracts when entering into contracts by negotiation, if a fixed-price contract is contemplated and the conditions set out in 16.206-2 and 16.206-3(a) to (d) apply. See also paragraph 12.207(b) for further restrictions on the use of time and equipment or hourly employment contracts for the acquisition of commercial property. (iii) An initial profit adjustment formula to be used to determine the fixed target profit, including an upper limit and a lower limit for the fixed target profit. (This formula generally provides for a lower level of cost responsibility than the contractor than a formula for determining final profit and final price.) (a) Description. A cost contract is a cost reimbursement contract in which the contractor receives no remuneration. Fixed-price contracts with price redefinition: Fixed-price contracts with price realignment include a maximum price, which is the maximum the company will pay. Contracts with prospective redefinition set a fixed price in the initial phase of the contract and can be reinstated at a certain time in subsequent periods. These are used when it is possible to negotiate the price for the initial duration of the contract, but not for future phases. During the first contract period, there were 23 changes in the scope of services, 11 of which included price increases. The 11 price adjustments included $1,277,575 for increased labour costs for this work.

However, a subsequent audit found that Empire`s labor costs actually decreased, as its workforce was reduced from 337 employees to 302 employees. This was much less than the 433 employees listed in the “Estimated Cost” section of the contract and in the certificate of current cost or price data. 16,207 fixed-price and fixed-term contracts. (4) Contracting entities shall carefully examine all justifications for proprietary data and delete all such data and references and quotations necessary for the protection of protected data before making the justifications available to the public. . . .