Contract Type

[ContractingGuy]

I've seen this discussed here and there over the years but never seem to see a clear answer. I'll use a laboratory testing requirement for an example...

What contract type would you use for conducting a variety of lab tests (e.g. drug screening, Covid testing, other blood tests, etc.) with fixed unit pricing? This is a relatively simple commercial contract.

1. There about 10 different tests that may be ordered. An estimated number can be specified of each. They will occur far too frequently for individual orders to be placed (e.g., IDIQ). Ex:

• Test 1          Est Qty: 50,000          Unit Price: $10.00
• Test 2          Est Qty: 25,000          Unit Price: $75.00
• Test 3          Est Qty: 30,000          Unit Price: $15.00
• Test 4.....

2. A firm-fixed price contract doesn't seem applicable because the range of possible tests needed is very broad.

3. A T&M contract doesn't seem appropriate because there are no labor hours applicable.

4. This has been done as a "fixed price" contract in the past, however that doesn't seem to fit into the umbrella of fixed price contracts at FAR 16.2.

 

[joel hoffman]

You can use a FFP contract with fixed  unit prices for  line items with estimated quantities that can vary depending upon usage.

more details available if you understand the basic concept. See for instance FAR 36.207.

You might have to include language regarding a range of quantities. The quantities can be increased by mods if necessary.

But this type pricing is still considered a FFP contract type. 

[joel hoffman]

As long as the unit prices are fixed with estimated quantities and you only pay for actual quantities provided, it can still be a FFP contract under Part 16.

I’d separately describe in the specs that the quantities are only estimates, that additional line item quantities mght be required (and contractually added/adjusted as necessary) , that there could be underruns of line item quantities, that payment will be made for actual quantities provided during the contract period and specify the billing periods (e.g., monthly, bi-weekly, weekly, etc.) for progress payments..

When closing out the contract, your contracting system might require you to reconcile final quantities, administratively adjust the final line item quantities and finalize the total contract cost. 

[ji20874]

What many people call fixed-unit-price contracts are often actually firm-fixed-price contracts -- that is, the amount the government pays for an item (the unit price) "is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract." Isn't that the definition of FFP? Thus, generally speaking, FUP = FFP.

[formerfed]

The most common contract type used for these type services is IDIQ with fixed unit prices.  Certain program individuals are designated as ordering officials.  They are authorized to place oral or other orders for tests.  The contracting officer then issues funded blanket orders periodically such as quarterly to cover the oral orders.

[joel hoffman]

23 hours ago, formerfed said:

The most common contract type used for these type services is IDIQ with fixed unit prices.  Certain program individuals are designated as ordering officials.  They are authorized to place oral or other orders for tests.  The contracting officer then issues funded blanket orders periodically such as quarterly to cover the oral orders.

That works. I don’t know if it is necessary to  use ID/IQ with orders for unit priced services or which is less complicated but ID/IQ wil work. Don’t know how this work is ordered or otherwise individually authorized  under the scenario described.

At any rate, unit-priced line items for specific services are a form of fixed-price contractiing.

[C Culham]

On 1/5/2024 at 4:59 AM, ContractingGuy said:

What contract type would you use for conducting a variety of lab tests (e.g. drug screening, Covid testing, other blood tests, etc.) with fixed unit pricing?

A firm fixed price contract.   Basis for my reasoning....

 

• Vern Edwards April 1, 2011

"Fixed" simply means no change except by specific and express agreement on a case-by-case basis.

"Price" is a stipulated amount of payment in exchange for supplies delivered and accepted or services rendered and accepted. See, e.g., FAR 52.232-1.

"Rate," in the context of this discussion, is an amount of dollars per unit.

By unofficial convention, the term "rate" is used in the acquisition of services when the number of units of service to be bought (usually minutes, hours, etc.) cannot be fixed in advance and the parties agree to delivery on demand and payment for units delivered. (In government contracting, the actual number that the contractor is obligated to deliver and that the government is obligated to pay for is usually capped, so as to avoid violations of the anti-deficiency act. Such caps are sometimes referred to as a "ceiling" or "ceiling price.")

While a "unit price" is in fact a "rate," the terms generally are not used synonymously. "Unit price" is most commonly used in supply and construction contracts, while "rate" is generally used in service contracts.

 

1. If a contract provides for payment of a fixed dollar amount per unit of a fixed quantity of a unit of supply, or a unit of service, or for completion of a construction project, then we ordinarily would say that it is a "fixed-price" contract (i.e., firm-fixed-price), because both the unit price and the number of units are fixed at the outset.

2. If a contract provides for payment of a fixed dollar amount per unit of a variable quantity of a unit of supply or unit construction work (e.g., cubic yards of excavation), we ordinarily would say it is a "fixed unit price" contract.

3. If a contract provides for payment of a fixed dollar amount per unit of a variable quantity of a service, we might call it a "fixed rate" or "fixed hourly rate" (or a "time-and-materials" or "labor hour") contract.

All three arrangements are loosely called "fixed price, but only No. 1 is really so.

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