Contract Types and Pricing Flashcards

In a Fixed-Price-Incentive-Firm (FPIF) contract, the 'ceiling price' represents:

Answer: The maximum price the government will pay regardless of the contractor's actual costs

The ceiling price in an FPIF contract is the absolute maximum the government will pay; if costs exceed the ceiling, the contractor absorbs 100% of costs above that point.

Fixed-Price contracts with Economic Price Adjustment (FP-EPA) are most suitable when:

Answer: There is significant uncertainty in future labor or material costs due to volatile economic conditions

FP-EPA contracts include price adjustment clauses tied to labor or material indices, protecting both parties when market volatility makes fixed pricing for the entire period unreasonable.

Cost-reimbursement contracts are generally more appropriate than fixed-price contracts when:

Answer: Significant technical uncertainties make it difficult to define requirements or estimate costs with confidence

Cost-reimbursement contracts are appropriate when uncertainties in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract.

Under the Truth in Negotiations Act (TINA), a contractor must submit certified cost or pricing data for negotiated procurements generally exceeding:

Answer: $2,000,000

The NDAA for FY2018 raised the TINA certified cost or pricing data threshold to $2,000,000, above which contractors must certify that submitted data is accurate, complete, and current.

Defective pricing is established when the government proves that a contractor:

Answer: Submitted cost or pricing data that was inaccurate, incomplete, or noncurrent at the time of price agreement

Defective pricing under TINA occurs when a contractor's certified cost or pricing data was not accurate, complete, and current as of the date of final agreement, entitling the government to a price reduction.

Which contract type uses a 'share ratio' to allocate cost underruns and overruns between the government and the contractor?

Answer: Cost-Plus-Incentive-Fee (CPIF)

CPIF contracts establish a target cost and fee with a share ratio so that if actual costs are above or below the target, both the government and contractor share the variance through fee adjustments.

The 'not-to-exceed' (NTE) price in a Labor-Hour contract serves to:

Answer: Set a ceiling that protects the government from unlimited cost exposure during performance

The NTE ceiling in a Labor-Hour contract caps the government's financial liability; if costs reach the ceiling, the contractor must notify the government and may stop work, preventing unlimited spending.