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  • Question

    Can a cost type contract be changed to a firm fixed price after it is substantially completed?


    Answer

    No, a cost type contract can't be changed to a FFP contract after it is substantially complete. While there isn't one reference that specifically prohibits this action, there are a couple of references indicating that retroactively changing a contract type isn't consistent with the FAR. While there could also be a discussion about the Contracting Officer's authority to make such a modification, I've limited my response to the following FAR  references.

    FAR 16.202 describes a FFP contract as a contract that is not adjusted on the basis of the contractor's cost experience. After substantially completing a cost reimbursement contract, changing the contract type to FFP would involve relying on the contractor's actual costs. FAR 16.301-2 outlines very specific applications for cost reimbursement contracts. It also requires documentation of the rationale for selecting a  particular contract type and a signature above the level of the Contracting Officer. A change in the contract type would be a contradiction to your contract file.

    Additionally, the factors in selecting a contract type (listed in FAR 16.104) are described in a forward looking manner. They all become irrelevant after the requirement is substantially completed and the costs have been incurred. The clauses found at FAR 52.216-7 and FAR 52.216-8 are in your CPFF contract and they outline how the Government will protect its interests until the final  indirect rates are settled. Generally, a large percentage of costs are based on indirect rates that DCMA supported pending an audit of the final rates. Transitioning to a FFP contract would prevent the Government from recovering overpayment due to overstated rates. It doesn't seem possible to protect the interests of the Government and convert the contract type in this environment.

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