Fixed-price contracts are agreements between the government and a contractor in which the government agrees to pay a specific price for completed work and products. These contracts are used primarily for acquiring commercial items and are increasingly being used for services as well. Under a fixed-price contract, the contractor accepts full cost responsibility and the contract price does not change, regardless of the contractor’s actual cost experience.

Firm fixed-price contracts (FFP) are a type of fixed-price contract in which the government agrees to pay a specific amount once the contractor’s performance has been completed and accepted. The contract price does not change, and the contractor bears all the risk. FFP contracts are typically used for purchasing commercial items and standard services.

Fixed-price contracts with economic price adjustment (FP/EPA) are contracts that include a clause that allows for the contract price to be revised based on economic uncertainties. These contracts are used when there are fluctuations in costs, such as changes in the price of materials. The adjustments can be based on established prices, actual costs of labor or material, or cost indices of labor or material.

Fixed-price incentive contracts (FPI) are fixed-price contracts that contain incentives for contractors based on their performance. These incentives can increase or decrease the contractor’s profit or fee. FPI contracts are used when there is still cost uncertainty, but not enough to warrant the use of a cost-reimbursement contract.

Fixed-price contracts with prospective price redetermination are contracts that provide for a firm fixed price for the initial period of contract performance, and a redetermination of the contract price at a stated date during performance. These contracts are used when it is not appropriate to use a firm fixed-price or fixed-price incentive contract.

Fixed-ceiling-price contracts with retroactive price redetermination are contracts that allow for a price redetermination after the contract is completed. The contract includes a negotiated ceiling price to ensure that the contractor assumes a reasonable amount of risk. These contracts are used for research and development contracts with an estimated

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