Different Types of Contracts Fixed Price

(ii) fixed-price contracts which are not intended for mainframes or research and development; and (d) adjustments based on labour or material cost indices. The Contractor should consider the use of an economic price adjustment clause based on the cost indices of the work or materials in the circumstances and subject to approval in accordance with paragraphs (d)(1) and (d)(2) of this section. In this article, let`s discuss the types of contracts you need to know for PMP testing and an example of when to use them. (a) Description. A basic contracting agreement is a written instrument of agreement negotiated between an agency, contract activity or procurement office and a contractor and contains (1) terms and conditions that apply to future contracts (contracts) between the parties during their term, (2) as accurate a description as possible of the supplies or services to be provided, and (3) pricing methods. Issuance and delivery of future orders under the basic order contract. A basic order contract is not a contract. The most common. A price is set from the beginning and does not change unless there is a change in scope. Fixed fixed price (FFP). The contractor assumes all risks. This type of contract is the norm when it comes to commercial products and services in competitively priced markets or when it comes to concluding production contracts for mature equipment.

(e) See subsection 19.5 for procedures for the repeal of part or part of multiple government procurement for small enterprises; reserve one or more mark-ups for small enterprises in the case of multiple award contracts; and defer small business contracts under multiple supply contracts. (D) a discussion of the measures envisaged in order to minimise the use of fixed-price contracts other than fixed-price contracts for future acquisitions for the same needs and to move to fixed-price contracts where possible. 16,207 Fixed-price and fixed-term contracts. (2) Adjustments based on actual labour or material costs. These price adjustments are based on increases or decreases in certain labor or material costs that the contractor actually incurs during the performance of the contract. (2) A fixed-price incentive contract would not be more appropriate; Fixed level of fixed prices/fixed costs (FFP/LOE). Such a contract requires the contractor to prove a certain effort over a certain period of time for a fixed dollar amount. This type of contract is used for surveys or studies for which the government can only explain the work to be done in general terms.

(a) Include clause 52.216-16, Incentive Price Revision-Firm Target, in tenders and contracts when considering a fixed price incentive agreement (fixed target). If the contract provides that supplies or services are ordered under a provision document or government option and the prices are subject to the incentive price change in accordance with the clause, the contract agent must use the clause with his assistant I. (E) consider the price or cost of each order as one of the factors in the selection decision; (iv) For non-fixed-price contracts, the documentation must include at least the following: Using our example above, you can use this type of contract to entice a seller to create an application. The seller would include all legitimate costs, such as the cost of a programmer`s time, in the initial estimate. Based on this initial estimate, the seller would charge a flat fee, which is a percentage of the legitimate costs it charges. At the end of this contract, you, as the buyer, are responsible for all reasonable costs incurred and fixed costs. – The government requires a firm commitment on the part of the contractor to provide the supplies or services at this maximum price (b) The use of reimbursement contracts is prohibited for the acquisition of commercial property (see parts 2 and 12). An FFP is the most common type of fixed-price contract. In an FFP contract, this scope of the product or service must be accurate.

The price is determined at the request of the buyer. (1) Any contract containing a basic agreement shall contain a range of services and prices, delivery and other appropriate conditions that apply to the respective contract. The basic agreement is incorporated into the contract by special reference (including the reference to any amendment) or by annex. (ii) For the acquisition of non-commercial items awarded without reasonable competition at prices (see 15.403-1(c)(1)), the contract must set separate fixed hourly rates that include wages, overhead, general and administrative expenses and profits for each category of work to be performed as described in paragraph (a). A specific quantity contract provides for the delivery of a certain quantity of certain deliveries or services for a certain period of time, with deliveries or services to be ordered at certain locations. (iii) Only one source is qualified and able to carry out the work at a reasonable price for the Government; or (ii) if trading a fixed fixed price is not appropriate, they may negotiate a formula to set the final price using the fixed target cost and the fixed target profit. The final costs are then negotiated at closing, and the final profit is determined by a formula, as in the framework of the fixed price incentive contract (fixed target) (see 16 403-1 above). (d) performance uncertainties can be identified and appropriate estimates of their impact on costs can be made and the contractor is prepared to accept a fixed price to bear the risks involved. (3) Clause 52.216-25, definition of the contract, with paragraph (b) in a manner consistent with paragraph 16.603-2(c). If, at the time of entering into the contract letter, the Contractor is aware that the Final Contract is based on reasonable price competition or otherwise meets the criteria of Section 15 403(1) to require the non-transmission of certified cost or price data, the words “and certified cost or price data in accordance with FAR 15.408, Table 15-2 justifying their proposal” may be deleted from subparagraph (a) of the clause.

If the order letter is awarded on the basis of price competition, the contracting authority shall use the clause with its deputy I. (ii) The need for supplies or services is mandatory and exceptionally urgent (i.e., if the government would suffer serious financial or other harm, if the need is not met sooner than would be possible if prices were set before the work began). The contracting authority shall fix the price as soon as possible. Under no circumstances will an entire order be evaluated retroactively. A fixed-price contract with an economic price adjustment may be used if (i) there are serious doubts as to the stability of the market or the working conditions that will exist during a longer period of performance of the contract and (ii) contingencies that would otherwise be included in the contract price can be identified and covered separately in the contract. Price adjustments based on fixed prices should normally be limited to industry-wide contingencies. Price adjustments based on labour and material costs should be limited to contingencies beyond the contractor`s control. For the adjustment of economic prices for sealed bidder contracts, see 14.408-4.

These have a clear service description, and the buyer accepts a seller`s price for it. In this type of contract, the seller bears the risk. An example of this is an order: it determines the price, quantity and date of the delivery item. There are three main types of fixed-price contracts: (1) The contract agent inserts the provision at 52.216-29, Time-and-Materials/Labor-Hour Proposal Requirements-Non-Commercial Item Acquisitions With Adequate Price Competition, in applications that contemplate the use of a time and material or hourly contract for non-commercial items if the price is intended to be based on reasonable price competition. Where approved by agency procedures, the contract agent may amend the provision in order to make one of the three approaches referred to in point (c) of the provision mandatory and/or to require the identification of all subcontractors, services, subsidiaries or related undertakings included in a mixed work package. Fixed price premium (FPAF). This is a type of incentive contract where an additional amount (supplement) of the royalty can be added to the base amount of the fee based on evaluative productivity measures (i.e. If the contractor performs particularly well). Of course, if the contractor does not exceed the established criteria, the award would be smaller, or the contractor might not even receive an additional bonus.

The amount of compensation is determined by the government on the basis of a subjective assessment of the contractor`s performance against established performance criteria. These contracts are particularly suitable for commissioning services. See Figure 4-1, Premium Plan Template, at the end of this chapter. (i) the types of labour and materials that can be adapted in accordance with the clause; Okay, what does that mean? Let`s go back to our car example, but add another element to the discussion, if the buyer wanted a standard model car with a supply of gasoline for a year, the seller could adjust the total contract price based on the cost of oil. (c) Restrictions. No fixed-cost contract will be awarded unless the Contractor complies with all the restrictions set out in Articles 15.404-4(c)(4)(i) and 16.301-3. . .