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IDIQ FFP Contract


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We have a proposal for a five year FFP contract (3 years with 2 year option) that requires significant material and distribution costs. With no way to control these 3rd party costs, what options are available to us to recapture any significant increases without simply guessing what may happen in the future?

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Guest Vern Edwards
[W]hat options are available to us to recapture any significant increases without simply guessing what may happen in the future?

Are you asking how to set contract prices? If not, can you rephrase your question in a way that will tell us what you want to know?

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Are you asking how to set contract prices? If not, can you rephrase your question in a way that will tell us what you want to know?

Sorry for the lack of clarity - Yes - I'm trying to make sure that if there are significant increases in my 3rd party costs, e.g. distribution and materials, that there is a way to modify the contract to cover the increases. I have no problem commiting to my internal costs but these two items represent about 33% of the contract value and if there is a spike in one or both it would be a challenge to complete the contract for its full term.

Is there specific terminology that needs to be part of the contract to allow for increases?

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I'm not clear on the type of contract you have. The thread title is "IDIQ FFP Contract, Outside Costs on FFP" so that leads me to think it's an IDIQ contract with fixed price unit rates (such as hourly rates). Then the resulting task orders are negotiated at either firm fixed price or Labor-Hour or Time and Materials basis.

If that's the case, T&M orders allow the materials, which could be distribution and materials, to be billed on a reimbursable basis. If the orders are firm fixed price however, the contract may still provide for materials to be reimbursable. In other words you want to negotiate the materials part of the contract on a reimbursable basis and not part of the fixed price amount.

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I would look in FAR part 16

I do not know if this applies but a starting point:

16.203 -- Fixed-Price Contracts with Economic Price Adjustment.

16.203-1 -- Description.

(a) A fixed-price contract with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Economic price adjustments are of three general types:

(1) Adjustments based on established prices. These price adjustments are based on increases or decreases from an agreed-upon level in published or otherwise established prices of specific items or the contract end items.

(2) Adjustments based on actual costs of labor or material. These price adjustments are based on increases or decreases in specified costs of labor or material that the contractor actually experiences during contract performance.

(3) Adjustments based on cost indexes of labor or material. These price adjustments are based on increases or decreases in labor or material cost standards or indexes that are specifically identified in the contract.

(B) The contracting officer may use a fixed-price contract with economic price adjustment in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. The contract type remains fixed-price with economic price adjustment when used with these incentives.

16.203-2 -- Application.

A fixed-price contract with economic price adjustment may be used when

(i) there is serious doubt concerning the stability of market or labor conditions that will exist during an extended period of contract performance, and

(ii) contingencies that would otherwise be included in the contract price can be identified and covered separately in the contract. Price adjustments based on established prices should normally be restricted to industry-wide contingencies. Price adjustments based on labor and material costs should be limited to contingencies beyond the contractor?s control. For use of economic price adjustment in sealed bid contracts, see 14.408-4.

(a) In establishing the base level from which adjustment will be made, the contracting officer shall ensure that contingency allowances are not duplicated by inclusion in both the base price and the adjustment requested by the contractor under economic price adjustment clause.

(:o In contracts that do not require submission of cost or pricing data, the contracting officer shall obtain adequate information to establish the base level from which adjustment will be made and may require verification of data submitted.

:D

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