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  • Question

    What is the guidance provided dictating Fixed Price contracts in the future?


    Answer

    Interestingly, the "guidance" regarding fixed or cost type contracts has not changed significantly over the years.  The fundamental guidance is found in FAR Part 16 as modified in DFARS Part 216 still generally remains as the guidance although there have been some modifications with such items as identified in DFARS 216.403-1 regarding FPIF contracts. 
     
    FAR 16.203 sums the overall guidance up nicely in this -
     
    "(d)
     
    (1) Each contract file shall include documentation to show why the particular contract type was selected. This shall be documented in the acquisition plan, or if a written acquisition plan is not required in the contract file.
     
    (i) Explain why the contract type selected must be used to meet the agency need.
     
    (ii) Discuss the Government’s additional risks and the burden to manage the contract type selected (e.g., when a cost-reimbursement contract is selected, the Government incurs additional cost risks, and the Government has the additional burden of managing the contractor’s costs). For such instances, acquisition personnel shall discuss—
     
    (A) How the Government identified the additional risks (e.g., pre-award survey, or past performance information);
     
    (B) The nature of the additional risks (e.g., inadequate contractor’s accounting system, weaknesses in contractor’s internal control, non-compliance with Cost Accounting Standards, or lack of or inadequate earned value management system); and
     
    (C) How the Government will manage and mitigate the risks.
     
    (iii) Discuss the Government resources necessary to properly plan for, award, and administer the contract type selected (e.g., resources needed and the additional risks to the Government if adequate resources are not provided).
     
    (iv) For other than a firm-fixed price contract, at a minimum the documentation should include—
     
    (A) An analysis of why the use of other than a firm-fixed-price contract (e.g., cost reimbursement, time and materials, labor hour) is appropriate;
     
    (B) Rationale that detail the particular facts and circumstances (e.g., complexity of the requirements, uncertain duration of the work, contractor’s technical capability and financial responsibility, or adequacy of the contractor’s accounting system), and associated reasoning essential to support the contract type selection;
     
    (C) An assessment regarding the adequacy of Government resources that are necessary to properly plan for, award, and administer other than firm-fixed-price contracts; and
     
    (D) A discussion of the actions planned to minimize the use of other than firm-fixed-price contracts on future acquisitions for the same requirement and to transition to firm-fixed-price contracts to the maximum extent practicable.
     
    (v) A discussion of why a level-of-effort, price redetermination, or fee provision was included."
     
    Policy memos and other communications from DPAP and others will often focus emphasis on contract types usually that is a focus on fixed price types of contracts, but that is the guidance of the FAR as well.
     

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