Abstract Fixed-price contracts and cost-reimbursements are two different forms of contracts used by the federal government while determining contract pricing. Contracting officers may use either when contracting however there are several types of fixed-price contracts. Fixed-price type of contracts provide for a firm price or an adjustable price. Fixed-price contracts consist of firm-fixed-price contracts, level-of-effort term contracts, materials reimbursement, fixed-price contract with economic price adjustment, incentive contracts, redetermination, cost-imbursement contacts and cost-plus-a-fixed-fee contracts.
As we understand the need for services for formerly incarcerated veterans the need has increased given the recent recession. There is a need for a rehabilitated homeless veteran’s center. This need will result in contractors building the facility to use as a reformatory to help veterans. After careful consideration and analysis, there will be a firm-fixed price contract. Keywords: contracts, cost, fixed price, cost-reimbursement.
There is a wide selection of contract types available in order to provided needed flexibility in acquiring the large variety and volume of supplies required by the federal government. Contract varies according to the degree and timing of the responsibility assumed by the contractor for the costs of performance and the amount and nature of the incentive offered to the contractor for achieving or exceeding specified standards or goals. The contract types are grouped into two broad categories; one category for fixed-price contracts and the cost-reimbursement contracts.
The specific contract types ranged from firm-fixed price, in which the contractor has full responsibility for the performance costs and resulting profit or loss, to cost-plus-fixed-fee, in which the contract has minimal responsibility for the performance costs and the negotiated fee is fixed. In between is the various incentive contracts in which the contractor’s responsibility for the performance costs and the profit or fee incentives offered are tailored to the uncertainties involved in contract performance.
The firm-fixed price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract places maximum risk and full responsibility for all costs and resulting profit or loss. This requires less administrative burdens upon the contracting parties. The firm-fixed price is suitable for supplies and services. Fixed-price contracts with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies.
Adjustments are based on established prices, actual costs of labor or material, and based on cost indexes or labor or material. Fixed price incentive contracts are used when the firm-fixed price contract is not suitable, the nature of the supplies and services being acquired are such that the contractor’s assumption of a degree of cost responsibility will provide a positive profit incentive and if the contract also includes incentives on performance and deliver.
Fixed –price contracts with prospective price redetermination provides a firm fixed-price for an initial period of contract deliveries and performance or a prospective redetermination at times during performance. Fixed-ceiling-price contracts with retroactive price determination are used for a fixed ceiling price and also retroactive price determination within the ceiling after completion. The last type of fixed-price, level of effort term contracts are a firm-fixed price, level of effort.
This contract confines the contractor to provide specified level of effort, over a period of time and the Government to pay the contractor a fixed dollar amount. After thorough analysis and consideration, the components used in the firm-fixed process will be used to build the Rehabilitated Homeless Veterans’ Center. The advantages to the government will put total risk on the contractor; it will be less administration work, and will simply the budget process (Hearn).
Solicitation is prepared and proposals will be open to acceptance. Offers must be open to firm-fixed price and the estimated timeframe to project completion is two years. According to FAR 16. 104, the federal government professes a preference for firm-fixed-price type contracts. Other factors may influence the selection of contract; if a contract is to extend for a long term during a time of economic uncertainty, a fixed-price with economic price adjustment contract might be more appropriate than a firm-fixed-price contract.
In conclusion and in order to be in compliance with FAR 16. 104, the contract chosen for the Rehabilitated Homeless Veterans’ Center will be the firm-fixed-price contract. The contractor will accept full responsibility when agreeing to this type of contract. ? References Feldman, Steven W. (2008-2009). Government Contract Guidebook. FAR 16. 104 and FAR 4:17 Contract Types Hearn, Emmett E. (2006). Federal Acquisition and Contract Management. Acquisition by of Sealed Bidding.