Firm Fixed-Price Contract

The firm – fixed – price contract is the type which “best utilizes the basic profit motive of business enterprise,” and should be used when the risk involved is “minimal or can be predicted with an acceptable degree of certainty”. In order to use the firm – fixed – price contract method, the contracting officer determines that the supplies or services are being procured on the basis of reasonably definite functional or detailed specifications, and; (a) There is adequate price competition; (b) There are reasonable price comparisons with prior purchases of the same or similar supplies or services made on a competitive basis or supported by valid cost or pricing data; (c) Available cost or pricing information permits realistic estimates of the probable cost of performance; or (d) Performance uncertainties can be identified and reasonable estimates of their cost impact can be made, and the contractor is willing to accept a firm – fixed price representing assumption of the risk involved.

(Also see Lump Sum or Unit Priced Contracts)

Updated: July 24, 2018