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  • Question

    How do we certify the availability for funding to support an RFP release and subsequent contract award for an FPI type contract? Especially, when the standard for budgeting is to budget to the target price, an amount that may be significantly different than the ceiling price.


    Answer

    Fixed-price incentive (FPI) contracts that are fully funded will be funded up to the ceiling price. If the program office does not want to, or can't, fund to the ceiling price  because of budget considerations, it will have to incrementally fund the contract. The contracting officer will then include the clause at DFARS 252.232-7007, Limitation of Government's Obligation, in the incrementally-funded fixed-price contract to protect itself from not obligating up to the ceiling price from the start. FPI contracts also have the clause at FAR 52.216-16, Incentive Price Revision-Firm Target, which requires the contractor to submit detailed quarterly statements showing cumulative price data for the contract. The program office and contracting officer use these statements to plan for additional incremental funding as needed.
    Please note that the Limitation of Funds clause and Limitation of Cost clause are for incrementally- and fully-funded cost-reimbursement type contracts, respectively.

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