Module 3 v2.7R
A fixed-price pricing arrangement with prospective price redetermination includes a FFP
for 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
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
The initial FFP period should be for the longest period possible, and each
subsequent 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 contractor
has an adequate accounting system.
Fixed-Ceiling-Price with Retroactive Price Redetermination
A 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 dollar
value 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.
Firm-Fixed-Price, Level-of-Effort Term
A FFP/LOE term pricing arrangement requires the contractor to provide a specified level
of effort over a stated period of time and the Government to pay the contractor a fixed
This is for work that can only be stated in general terms.
type is usually used for investigation of study in a specific R&D area.
The product of the
contract is usually a report showing the results of the required level of effort.
payment is based on the effort expended, not on the results achieved.
officer can only use this contract type if the required work cannot be clearly defined, the