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Firm-Fixed-Price Subcontract / Fixed--ceiling-price with retroactive redetermination


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I realize that a firm-fixed-price subcontract is not subject to any adjustment on the basis of the subcontractor's cost experience in performing the contract, but, what if the prime contractor needs to increase or decrease the scope of work (partly due to the work not being clearly enough defined to determine a definite scope and definite price), could then, the price be adjusted in accordance with the increase or decrease in work? I was taught that a firm-fixed-price contract should not have any modifications for an increase or decrease in the work so I am hesitant to issue such a subcontract. Maybe I'm not remembering correctly though. I would appreciate any advice on this.

I would issue a labor hour subcontract if I could be we have to seek consent on anything other than fixed-price type subcontracts and receiving that consent takes longer than we have the time for. So I am left to figure out the best fixed-price vehicle to fit this into.

Because the work does involve some research and analysis, the p.o.p. is short, is under $100k, and, the use of a ny other fixed-price contract type is impracticable, that maybe a fixed-ceiling-price contract with retroactive price redetermination would be better. I have not had any experience with these and wanted to reach out and ask if anyone has and can offer any pointers on it.

Thank you in advance.

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ETA- I'm assuming you're the Prime Contractor in my responses (and not the CO).

but, what if the prime contractor needs to increase or decrease the scope of work (partly due to the work not being clearly enough defined to determine a definite scope and definite price),

Sure, it's a Change Order or Requet for Change. BTW, Who identified the need for change in scope? Customer, Prime or Sub?

could then, the price be adjusted in accordance with the increase or decrease in work?

Typically, I work with the sub to agree on a price reduction if a piece of work is being de-scoped or simply ask for a quote for the additional work if adding scope

I was taught that a firm-fixed-price contract should not have any modifications for an increase or decrease in the work so I am hesitant to issue such a subcontract. Maybe I'm not remembering correctly though. I would appreciate any advice on this.

I can't remember a larger FFP job (say +250k, POP> 3 months) that I've NEVER had to adjust

I would issue a labor hour subcontract if I could be we have to seek consent on anything other than fixed-price type subcontracts and receiving that consent takes longer than we have the time for. So I am left to figure out the best fixed-price vehicle to fit this into.

If the Prime contract is FFP, I'd insist on the Subs performing FFP whenever possible.

Because the work does involve some research and analysis, the p.o.p. is short, is under $100k, and, the use of a ny other fixed-price contract type is impracticable, that maybe a fixed-ceiling-price contract with retroactive price redetermination would be better. I have not had any experience with these and wanted to reach out and ask if anyone has and can offer any pointers on it.

I don't understand this last part.

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Guest Vern Edwards
I realize that a firm-fixed-price subcontract is not subject to any adjustment on the basis of the subcontractor's cost experience in performing the contract, but, what if the prime contractor needs to increase or decrease the scope of work (partly due to the work not being clearly enough defined to determine a definite scope and definite price), could then, the price be adjusted in accordance with the increase or decrease in work?

Yes. Think of a contract as an equation: X = Y. Now substitute CONTRACT for X and PRICE for Y: CONTRACT = PRICE. In order to maintain the relationship between CONTRACT and PRICE, if you change anything on one side of the equation you must make a change on the other side. So, if you change the contract terms, you may have to make an adjustment to the price. If the change is within the scope of the contract, then the adjustment must be "equitable," meaning that the increase or decrease in price must reflect the increase or decrease in cost plus a reasonable adjustment to profit. If the change is outside of the scope of the contract, then the adjustment need not be commensurate with the increase or decrease in cost, but must be fair and reasonable.

That business about a fixed-price not being subject to adjustment based on cost experience means only that the if the contract does not change, then the contract price will not be changed merely because the contractor's costs are higher than expected. But if you change the contract, then the contractor will be entitled to an adjustment.

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