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  • Question

    Are time and materials contracts considered fixed or cost type contract for calculating impact. it is my understanding that the material portion if cost type and the labor rate portion if fixed but i have encountered a number of differing opinions.


    Answer

    Requirements for processing Cost Accounting Standards (CAS) noncompliances are addressed in Federal Acquisition Regulation (FAR) §30.605.  More specifically, FAR 30.605(h)(4) and (5) describe different ways of computing the cost impact calculation for “fixed-price” contracts that varies from that for “flexibly-priced” contracts.   In essence, for purposes of computing noncompliance cost impacts, all contracts are classified as either “fixed-price” or “flexibly-priced” and the definitions of these two classifications are provided at FAR 30.001.

    Per
    FAR 30.001, time-and-materials contracts are in part “fixed-price” contracts and in part “flexibly-priced” contracts. 
     
    “‘Fixed-price contracts and subcontracts’ means –
    (4) The fixed-hourly rate portion of time-and-materials and labor-hours contracts and subcontracts (Subpart 16.6)”
     
    “Flexibly-priced contracts and subcontracts’ means –
    (5) The materials portion of time-and-materials contracts and subcontracts (Subpart 16.6)”

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