There must also be reasonable assurance that

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There must also be reasonable assurance that additional information will be available atan early point in the contract performance that will allow negotiation of either a FFP or FPIF pricing arrangement based on the actual costs experienced and the initial profit adjustment formula. [FAR 16.403-2]The use of both forms of FPI contracts require a contractor to have an adequate accounting system and for adequate cost or pricing information to be available, either prior to award for FPIF or at an early point in contract performance for FPIS, to establishfirm targets [FAR 16.403]. DFARS 216.104 provides a link to Director, Defense Procurement and Acquisition Policy memorandum, “Guidance on Using Incentive and Other Contract Types,” dated April 1, 2016. Fixed-Price with Prospective Price RedeterminationCON091 CONFUN12Module 3 v2.2
A fixed-price pricing arrangement with prospective price redetermination includes a FFPfor an initial period of contract deliveries or performance and redetermination of the price for subsequent periods of performance at a stated time or times during performance. This contract type is used when it’s possible to negotiate a fair and reasonable FFP for an initial period, but not for subsequent periods of contract performance. The initial FFP period should be for the longest period possible, and eachsubsequent pricing period should be at least 12 months. A ceiling price may also be included in the contract. This pricing arrangement cannot be used unless the contractorhas an adequate accounting system. [FAR 16.205] Fixed-Ceiling-Price with Retroactive Price RedeterminationA fixed-ceiling-price pricing arrangement with retroactive price redetermination includes a fixed ceiling price and allows for redetermination of the price within the ceiling after completion of the contract. This contract type can only be used for research and development (R&D) acquisitions with an estimated cost of $150,000 or less, where the head of the contracting activity has approved its use in writing. This is only appropriate when a fair and reasonable price cannot be negotiated prior to award, and the low dollarvalue and short performance period for the contract make the use of any other FP contract type impractical. The contractor must also have an adequate accounting system for the price redetermination. [FAR 16.206]Fixed-Fixed-Price, Level-of-Effort TermA FFP/LOE term pricing arrangement requires the contractor to provide a specified levelof effort over a stated period of time and the Government to pay the contractor a fixed dollar amount. This is for work that can only be stated in general terms. This contract type is usually used for investigation of study in a specific R&D area. The product of thecontract is usually a report showing the results of the required level of effort. However, payment is based on the effort expended, not on the results achieved. A contracting officer can only use this contract type if the required work cannot be clearly defined, the

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