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  • Question

    What are the risk factor for each of the proposals? Can you provide me any information on Cost Contract Ceiling?


    Answer

    It is difficult to evaluate the risks factors for a proposal without performing a thorough review of the proposal. A general discussion of contract risk can be found here (see section 3.6). Overall contract risk can be broken out into contract type risk, performance risk, and cost risk. The key to properly assigning risk to both the customer and supplier is to use the contract type best suited for the acquisition. The use of a cost-plus-fixed-fee (CPFF) contract type shifts much of the cost risk and performance risk to the customer.

    A useful site for evaluating the appropriateness of different contract types against different levels of risk can be found here. Note that a CPFF contract does not have a cost ceiling. Instead, it has an "estimated cost" beyond which the contractor must obtain government approval if it wants to be reimbursed for additional costs.

    Please click here for a useful AAP question and answer that discusses CPFF contracts and cost ceilings. 

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