Fixed - Price Contracts Fixed-price types of contracts provide for a firm price, or, in appropriate cases, an adjustable price.
This part describes types of contracts that may be used in acquisitions. It prescribes policies and procedures and provides guidance for selecting a contract type appropriate to the circumstances of the acquisition.
Contract types vary according to -- 1 The degree and timing of the responsibility assumed by the contractor for the costs of performance; and 2 The amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.
The specific contract types range from firm-fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit or lossto cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee profit is fixed.
In between are the various incentive contracts see Subpart Contract types not described in this regulation shall not be used, except as a deviation under Subpart 1. Prime contracts including letter contracts other than firm-fixed-price contracts shall, by an appropriate clause, prohibit cost-plus-a-percentage-of-cost subcontracts see clauses prescribed in Subpart Negotiating the contract type and negotiating prices are closely related and should be considered together.
The objective is to negotiate a contract type and price or estimated cost and fee that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance.
However, when a reasonable basis for firm pricing does not exist, other contract types should be considered, and negotiations should be directed toward selecting a contract type or combination of types that will appropriately tie profit to contractor performance.
In particular, contracting officers should avoid protracted use of a cost-reimbursement or time-and-materials contract after experience provides a basis for firmer pricing.
This shall be documented in the acquisition plan, or in the contract file if a written acquisition plan is not required by agency procedures. For such instances, acquisition personnel shall discuss— A How the Government identified the additional risks e.
There are many factors that the contracting officer should consider in selecting and negotiating the contract type. They include the following: Price analysis, with or without competition, may provide a basis for selecting the contract type.
The degree to which price analysis can provide a realistic pricing standard should be carefully considered. In the absence of effective price competition and if price analysis is not sufficient, the cost estimates of the offeror and the Government provide the bases for negotiating contract pricing arrangements.
It is essential that the uncertainties involved in performance and their possible impact upon costs be identified and evaluated, so that a contract type that places a reasonable degree of cost responsibility upon the contractor can be negotiated.
Complex requirements, particularly those unique to the Government, usually result in greater risk assumption by the Government. This is especially true for complex research and development contracts, when performance uncertainties or the likelihood of changes makes it difficult to estimate performance costs in advance.
As a requirement recurs or as quantity production begins, the cost risk should shift to the contractor, and a fixed-price contract should be considered.The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S.
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