Firm-Fixed-Price (FFP)
A firm-fixed-price (FFP) contract sets a price that is not subject to adjustment based on the contractor's cost experience in performance. FAR 16.202 places maximum cost risk on the contractor, who absorbs every overrun and keeps every underrun.
FFP is appropriate when the contracting officer can establish a fair and reasonable price at the outset: adequate price competition, comparisons with prior purchases of the same or similar items, cost or pricing information supporting realistic estimates, or performance uncertainties the contractor can price and is willing to accept (FAR 16.202-2). For commercial products and services, FAR 12.207 makes it mandatory — FFP or fixed-price with economic price adjustment, nothing else.
Once awarded, the price does not move with actual costs. Overruns come out of profit; efficient performance keeps the savings. Award-fee or performance incentives may be added if based on factors other than cost (FAR 16.202-1).
The type transfers risk only when the requirement is stable. An FFP award against a vague specification sends cost risk back to the government as claims, equitable adjustments, and sole-source modifications priced without competition.
Regulatory Reference
FAR 16.202; FAR 16.202-2; FAR 12.207
RFO Status
The Part 16 model deviation keeps FFP at 16.202 and adds section 16.104, implementing Executive Order 14402's fixed-price default: other-than-fixed-price contracts now need written justification, with agency-head approval at $100 million for DoD, $35 million for NASA, $25 million for DHS, and $10 million for other agencies.
Category
Contract Types & Vehicles
How AcqBot Helps
AcqBot tests whether the record actually supports FFP — competition history, prior-purchase price comparisons, specification stability — and drafts the contract-type determination; where the answer is other than fixed-price, it assembles the justification section 16.104 now requires.
Related glossary entries
Other Transaction Authority (OTA)
Other Transaction Authority (OTA) lets certain agencies enter agreements for research, prototypes, and follow-on production that are not standard procurement contracts — largely exempt from the FAR — to attract nontraditional contractors and move faster than conventional acquisition allows.
Indefinite Delivery/Indefinite Quantity (IDIQ)
An Indefinite Delivery/Indefinite Quantity (IDIQ) contract buys an unspecified quantity of supplies or services, within stated minimum and maximum limits, over a fixed period. The government buys through task or delivery orders under FAR 16.504, with a preference for multiple awards.
Cost-Plus-Fixed-Fee (CPFF)
A cost-plus-fixed-fee (CPFF) contract reimburses allowable costs and pays a fee negotiated and fixed at inception. The fee does not vary with actual cost, though it may adjust when the work changes. FAR 16.306 governs; statutory caps limit the fee.
Time-and-Materials (T&M)
A time-and-materials (T&M) contract pays fixed hourly labor rates — wages, overhead, G&A, and profit built in — plus materials at actual cost. FAR 16.601 permits it only when the extent or duration of the work cannot be estimated accurately at award.