Acquisitions And Procurement Help 300 words needed.  APA 7th edition format.  Scholarly source must be used. C om parison of M ajor C ontract T ypes

Acquisitions And Procurement Help 300 words needed.  APA 7th edition format.  Scholarly source must be used. C
om

parison of M
ajor C

ontract T
ypes

F

irm
-F

ixed-P
rice

(F
F

P
)

F
ixed-P

rice E
conom

ic
P

rice A
djustm

ent
(F

P
E

P
A

)

F

ixed-P
rice Incentive

F
irm

T
arget

(F
P

IF
)

F

ixed-P
rice A

w
ard-

F
ee

(F
P

A
F

)

F
ixed-P

rice
P

rospective P
rice

R
edeterm

ination
(F

P
3R

)

C
ost-P

lus-Incentive-
F

ee (C
P

IF
)

C
ost-P

lus-A
w

ard-F
ee

(C
P

A
F

)
C

ost-P
lus-F

ixed-F
ee

(C
P

F
F

)
C

ost or
C

ost-Sharing
(C

or C
S)

T
im

e &
M

aterials
(T

&
M

)

P
rincipal R

isk to
be M

itigated
N

one. T
hus, the

contractor assum
es all

cost risk.

U
nstable m

arket prices
for labor or m

aterial
over the life of the
contract.

M
oderately uncertain

contract labor or
m

aterial requirem
ents.

R
isk that the user w

ill
not be fully satisfied
because of judgm

ental
acceptance criteria.

C
osts of perform

ance
after the first year
because they cannot be
estim

ated w
ith

confidence.

H
ighly uncertain and speculative labor hours, labor m

ix, and/or m
aterial requirem

ents (and other things) necessary to perform
the

contract. T
he G

overnm
ent assum

es the risks inherent in the contract, benefiting if the actual cost is low
er than the expected cost, or

losing if the w
ork cannot be com

pleted w
ithin the expected cost of perform

ance.

U
se W

hen . . .
T

he requirem
ent is

w
ell-defined.

xC
ontractors are

experienced in m
eeting

it.
xM

arket conditions are
stable.
xFinancial risks are
otherw

ise insignificant.

T
he m

arket prices at risk
are severable and
significant. T

he risk
stem

s from
industry-

w
ide contingencies

beyond the contractor’s
control. T

he dollars at
risk outw

eigh the
adm

inistrative burdens
of an FPE

PA
.

A
ceiling price can be

established that covers
the m

ost probable risks
inherent in the nature
of the w

ork. T
he

proposed profit sharing
form

ula w
ould

m
otivate the contractor

to control costs and to
m

eet other objectives.

Judgm
ental standards

can be fairly applied
by the fee determ

ining
official. T

he potential
fee is large enough to
both:
xProvide a m

eaningful
incentive. 1
xJustify related
adm

inistrative burdens.

T
he G

overnm
ent needs

a firm
com

m
itm

ent
from

the contractor to
deliver the supplies or
services during
subsequent years. T

he
dollars at risk outw

eigh
the adm

inistrative
burdens of an FPR

P.

A
n objective

relationship can be
established betw

een
the fee and such
m

easures of
perform

ance as actual
costs, delivery dates,
perform

ance
benchm

arks, and the
like.

O
bjective incentive

targets are not feasible
for critical aspects of
perform

ance.
Judgm

ental standards
can be fairly applied.
Potential fee w

ould
provide a m

eaningful
incentive.

R
elating fee to

perform
ance (e.g., to

actual costs) w
ould be

unw
orkable or of

m
arginal utility.

T
he contractor expects

substantial
com

pensating benefits
for absorbing part of
the costs and/or
foregoing fee or the
vendor is a non-profit
entity.

N
o other type of contract

is suitable (e.g., because
costs are too low

to justify
an audit of the contractor’s
indirect expenses).

E
lem

ents
A

firm
-fixed-price for

each line item
or one

or m
ore groupings of

line item
s.

xA
fixed-price, ceiling

on upw
ard adjustm

ent,
and a form

ula for
adjusting the price up or
dow

n based on:
xE

stablished prices.
xA

ctual labor or m
aterial

costs.
xL

abor or m
aterial

indices.

xC
eiling price

xT
arget cost

xT
arget profit

xD
elivery, quality, or

other perform
ance

targets (optional)
xProfit sharing form

ula
x120 %

ceiling and
50/50 share are points
of departure

xFixed-price.
xA

w
ard am

ount
xA

w
ard fee evaluation

criteria and procedures
for m

easuring
perform

ance against
the criteria

xFixed-price for the
first period.
xProposed subsequent
periods (at least 12
m

onths apart).
xT

im
etable for pricing

the next period(s).

xT
arget cost

xA
m

inim
um

,
m

axim
um

, and target
fee
xA

form
ula for

adjusting fee based on
actual costs and/or
perform

ance
xPerform

ance targets
(optional)

xT
arget cost

xB
ase am

ount, if
applicable, and an
aw

ard am
ount

xA
w

ard fee evaluation
criteria and procedures
for m

easuring
perform

ance against
the criteria

xT
arget cost

xFixed fee
xT

arget cost
xN

o fee
xIf C

S, an agreem
ent

on the G
overnm

ent’s
share of the cost.

xC
eiling price

xA
per-hour labor rate that

also covers overhead and
profit
xProvisions for
reim

bursing direct
m

aterial costs

C
ontractor is

O
bliged to:

Provide an acceptable
deliverable at the tim

e,
place and price
specified in the
contract.

Provide an acceptable
deliverable at the tim

e
and place specified in
the contract at the
adjusted price.

Provide an acceptable
deliverable at the tim

e
and place specified in
the contract at or
below

the ceiling price.

Perform
at the tim

e,
place, and the price
fixed in the contract.

Provide acceptable
deliverables at the tim

e
and place specified in
the contract at the price
established for each
period.

M
ake a good faith effort to m

eet the G
overnm

ent’s needs w
ithin the estim

ated cost in the C
ontract, Part I

the Schedule, Section B
Supplies or services and prices/costs.

M
ake a good faith effort

to m
eet the G

overnm
ent’s

needs w
ithin the ceiling

price.

C
ontractor

Incentive (other
than m

axim
izing

goodw
ill) 1

G
enerally realizes an

additional dollar of
profit for every dollar
that costs are reduced.

G
enerally realizes an

additional dollar of
profit for every dollar
that costs are reduced.

R
ealizes profit on cost

by com
pleting w

ork
below

the ceiling price.
M

ay earn higher profit
by incurring costs
below

the target cost or
by m

eeting objective
perform

ance targets.

G
enerally realizes an

additional dollar of
profit for every dollar
that costs are reduced;
earns an additional fee
for satisfying the
perform

ance standards.

For the period of
perform

ance, realizes
an additional dollar of
profit for every dollar
that costs are reduced.

R
ealizes a higher fee

by com
pleting the

w
ork at a low

er cost
and/or by m

eeting
other objective
perform

ance targets.

R
ealizes a higher fee

by m
eeting judgm

ental
perform

ance standards.

R
ealizes a higher rate

of return (i.e., fee
divided by total cost)
as total cost decreases.

If C
S, shares in the

cost of providing a
deliverable of m

utual
benefit.

T
ypical

A
pplication

C
om

m
ercial supplies

and services.
L

ong-term
contracts for

com
m

ercial supplies
during a period of high
inflation.

Production of a m
ajor

system
based on a

prototype.

Perform
ance-based

contracts.
L

ong-term
production

of spare parts for a
m

ajor system
.

R
esearch and

developm
ent of the

prototype for a m
ajor

system
.

L
arge scale research

study.
R

esearch study.
Joint research w

ith
educational
institutions.

E
m

ergency repairs to
heating plants and aircraft
engines.

P
rincipal

L
im

itations in
F

A
R

/D
F

A
R

S
P

arts 16, 32, 35,
and 52

2

G
enerally N

O
T

appropriate for R

&
D

.
M

ust be justified.
M

ust be justified. M
ust

be negotiated.
C

ontractor m
ust have

an adequate accounting
system

. C
ost data m

ust
support targets.

M
ust be negotiated.

M
U

ST
be negotiated.

C
ontractor m

ust have
an adequate accounting
system

that supports
the pricing periods.
Prom

pt
redeterm

inations.

T
he contractor m

ust have an adequate accounting system
. T

he G
overnm

ent m
ust exercise surveillance

during perform
ance to ensure use of efficient m

ethods and cost controls. M
ust be negotiated. M

ust be
justified. Statutory and regulatory lim

its on the fees that m
ay be negotiated. M

ust include the applicable
L

im
itation of C

ost clause at FA
R

52.232-20 through 23.

D
&

F required (w
/ H

C
A

if
over 3 years). G

overnm
ent

M
U

ST
exercise

appropriate surveillance to
ensure efficient
perform

ance. D
ocum

ent
any ceiling increases.

V
ariants

Firm
-Fixed-Price

L
evel-of-E

ffort.

Successive T
argets

(FPIS)

R
etroactive

R
edeterm

ination

C

om
pletion or T

erm
.

L

abor H
our (L

H
)

1 G
oodw

ill is the value of the nam
e, reputation, location, and intangible assets of the firm

.
2 C

om
ply w

ith any U
S

D
(A

T
&

L), D
P

A
P

or other m
em

oranda that have not been incorporated into the D
F

A
R

S
or D

oD
D

irectives or Instru
ctions.

D
S

M
C

M
AY

2013

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