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  • Question

    Will moving this contract to section 2 affect our leverage or negotiation in any way. The contract is completed and FDD has occurred all contracts actions are complete. But we still have the negotiations pending. Any insight would be helpful.


    Answer

    Fixed Price retroactive redetermination contracts are "appropriate for research and development contracts estimated at the simplified acquisition threshold or less when it is established at the outset that a fair and reasonable firm fixed price cannot be negotiated and that the amount involved and short performance period make the use of any other fixed-price contract type impracticable" (FAR 16-206-2).   They also include a NTE ceiling, and "should be awarded only after negotiation of a billing price that is as fair and reasonable as the circumstances permit."

    Assuming the conditions at FAR 16-206-3 are met, the contract should also include clause 52.216-6 (Price Redetermination-Retroactive). Paragraphs (d) and (f)  state negotiation are required to redetermine fair and reasonable prices, and also an adjustment if a difference is found between current billing prices and estimated final prices.  Since we know the contractors risk recedes as they gets closer to contract completion, your position should not be in jeopardy.  The language in the clause  is clear. Remember the redetermination can also result in a decrease of billing prices. If the contract is physically completed, your position is stronger, since the contractor should not be paid for risk they're already mitigated.

    If  they are able to  show the actual costs of performance (having an  adequate accounting system), then any differences between actual and estimated prices should be easily resolved.   The burden is on the Contractor to submit data indicating the redetermined prices are greater or less than the current billing prices. 

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