I searched this topic extensively and I could only find bits and pieces, but nothing to answer my question overall - so I'm hoping for some additional insight.
Pertaining to a FFP contract, once awarded, the estimated hours our company moves into our timekeeping system. So, if we estimate 1920HRS per FTE, we would move that over and allow each employee 1920 hours on contract. However, for those employees who work a few extra hours here and there to get the job done, or those who are motivated to go the extra mile, they're likely going to exceed the 1920 hours. If/when that happens, they will (towards then end of the PoP), receive a notification that they have exceeded the total # of hours allocated. As a result, the hours will need to be adjusted up with a higher ceiling so that they can continue billing.
In previous engagements, I've never seen a company place a ceiling on the total # of hours an employee can bill on a FFP contract, they only draw the line at the end of the PoP.
My understanding, it should not matter, as the labor rate is diluted. However, others say that projected profitability is affected if we thought we would accomplish the job with X hours and then it ends up taking Y hours. Labor cost is not necessarily affected because it's a salary position, but projected cost of project is affected because we thought it would be accomplished with fewer hours. It boils down to "budgeted hours".
I wanted some other input on this topic.