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  • Question

    Can CPFF, CPAF, and CPIF contracts use cost ceilings or price ceilings? If so, how common is this and in what circumstances is it allowed? Thanks!


    Answer

    FAR 52.232-20, Limitation of Cost, clause is incorporated in all fully funded cost-reimbursement contracts.  This clause doesn't use the word "ceiling" but it does put a limitation on the amount of cost the contractor is allowed to incur unless the contracting officer revises (e.g. increases) the estimated cost for the contract.  The clause states in paragraph (a), "the parties estimate that performance of this contract, exclusive of any fee, will not cost the Government more than (1) the estimated cost specified in the Schedule...."  It also states in paragraph (d), "except as required by other provisions of this contract, specifically citing and stated to be an exception to this clause (1) the Government is not obligated to reimburse the Contractor for costs incurred in excess of (i) the estimated cost specified in the schedule.  However, Time and Materials and Labor Hour contracts do have "ceilings" included in the contract (See FAR Clause 52.232-7, Payments under Time-and-Materials and Labor Hour Contracts, paragraphs (d) & (e).

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