Expected that answer. I presume you rely on FAR 16.403-2(a)(v) as authority. While I understand the ceiling must mean something, it does describe the maximum amounts that “may be paid”, not “shall” be paid.
The other camp argues FAR 16.403-2( B ) and FAR 16.403-2(d)(4) are more appropriate for our situation. In the situation where there is a failure to establish a FFP or it is “inappropriate,” the final price is established by the specified, prescribed formula. The formula specifically contemplates that the final negotiated cost receives: “an adjustment for profit or loss, determined as follows….(ii) if the total final negotiated cost is greater than the total firm target cost, the adjustment is the total firm target profit, less (assume 25%) percent of the amount by which the total final negotiated cost exceeds the total firm target cost.”
Their read on this is that if the total negotiated final costs are above the ceiling (which is clearly contemplated here where there is no FFP established), the contractor may lose some if not all of his profit, but there is nothing in the FAR that says he should be penalized to eat the costs above the ceiling too. That would make it akin to a FFP contract, which is exactly what the parties were unable to achieve. And if the purpose of this contract is to shift the risk to the govt on costs due to the illdefined nature of the work, then why should the contractor bear costs above the ceiling if there is no FFP negotiated?
I referenced the previous post from you guys a few years back in my original post above, I didn’t follow whether the consensus is that if the profit calc produces a negative number that the costs should be ‘adjusted’ down.
By the way, I’ve read your Nov. ’09 Briefing Paper on these contracts and the NASA/DOD guide from ‘69. Both very helpful.