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    FAR 12.207(a) states "agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items" and gives some exceptions to other contract types, then states is (e) "Use of any contract type other than those authorized by this subpart to acquire commercial items is prohibited." Can a Fixed-Price Contract with Prospective Price Redetermination be used to acquire commercial items? FAR 16.205 is silent on commercial/noncommercial acquisitions.


    Answer

    This response is based on the information provided.  We suggest you discuss with your contracting team, program manager and/or legal department as appropriate. 
     
    "FAR 12.207 -- Contract Type.
    (a) Except as provided in paragraph (b) of this section, agencies shall use firm-fixed-price contracts or fixed-price contracts with economic price adjustment for the acquisition of commercial items.
    (b)    (1) A time-and-materials contract or labor-hour contract (see Subpart 16.6) may be used for the acquisition of commercial services when—
    .... 
      (2) Each D&F required by paragraph (b)(1)(ii)(A) of this section shall contain sufficient facts and rationale to justify that no other contract type authorized by this subpart is suitable. At a minimum, the D&F shall—
    .... 
      (iv) Describe actions planned to maximize the use of firm-fixed-price or fixed-price with economic price adjustment contracts on future acquisitions for the same requirements.
      (3) See 16.601(d)(1) for additional approval required for contracts expected to extend beyond three years.
    ....
    (e) Use of any contract type other than those authorized by this subpart to acquire commercial items is prohibited."
     
    You have answered your own question.  The only contract types allowed when contracting commercially under the aegis of FAR part 12 are firm-fixed-price contracts or fixed-price contracts with economic price adjustment.  With proper justification and documentation, time and materials, labor hour, and indefinite-delivery contracts using the aforementioned contract types may be used.
     
    The question implies the wireless telecom services are not able to be reasonably priced beyond the first year. If prices are uncertain in future years, the government already has the right to mutually negotiate prices based on changes market conditions.  The leverage to enter negotiations is that the government does not have to exercise an option, in fact should not, if the option is not in the government's best interest. 
     
    FAR 16.205 -- Fixed-Price Contracts with Prospective Price Redetermination, has specific application and limitations that may not apply even if the contracting officer were allowed to use it in a FAR part 12 scenario.
     
    "FAR 16.205-1 -- Description.
    A fixed-price contract with prospective price redetermination provides for --
    (a) A firm fixed price for an initial period of contract deliveries or performance and
    (b) Prospective redetermination, at a stated time or times during performance, of the price for subsequent periods of performance.
    FAR 16.205-2 -- Application.
    A fixed-price contract with prospective price redetermination may be used in acquisitions of quantity production or services for which it is possible to negotiate a fair and reasonable firm fixed price for an initial period, but not for subsequent periods of contract performance.
    (a) The initial period should be the longest period for which it is possible to negotiate a fair and reasonable firm fixed price. Each subsequent pricing period should be at least 12 months.
    (b) The contract may provide for a ceiling price based on evaluation of the uncertainties involved in performance and their possible cost impact. This ceiling price should provide for assumption of a reasonable proportion of the risk by the contractor and, once established, may be adjusted only by operation of contract clauses providing for equitable adjustment or other revision of the contract price under stated circumstances.
    FAR 16.205-3 -- Limitations.
    This contract type shall not be used unless --
    (a) Negotiations have established that --
      (1) The conditions for use of a firm-fixed-price contract are not present (see 16.202-2), and
      (2) A fixed-price incentive contract would not be more appropriate;
    (b) The contractor’s accounting system is adequate for price redetermination;
    (c) The prospective pricing periods can be made to conform with operation of the contractor’s accounting system; and
    (d) There is reasonable assurance that price redetermination actions will take place promptly at the specified times.
    FAR 16.205-4 -- Contract Clause.
    The contracting officer shall, when contracting by negotiation, insert the clause at 52.216-5, Price Redetermination -- Prospective, in solicitations and contracts when a fixed-price contract is contemplated and the conditions specified in 16.205-2 and 16.205-3(a) through (d) apply."
     

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