Contract Types: FFP, T&M, CPFF Flashcards

Under a Firm-Fixed-Price (FFP) contract, who bears the risk of cost overruns?

Answer: The contractor

In an FFP contract, the contractor assumes full responsibility for cost overruns since the price is fixed regardless of actual costs incurred.

Which FAR part primarily governs the selection and use of contract types in federal procurement?

Answer: FAR Part 16

FAR Part 16 covers types of contracts and the policies governing their selection and use in federal acquisition.

A Time-and-Materials (T&M) contract reimburses the contractor for direct labor at:

Answer: Fixed hourly rates that include profit

T&M contracts pay fixed hourly rates that already incorporate wages, overhead, general and administrative costs, and profit.

What is the primary limitation that must accompany every Time-and-Materials contract at award?

Answer: A ceiling price the government will not exceed

FAR 16.601 requires that every T&M contract include a ceiling price to limit the government's cost exposure.

Under a Cost-Plus-Fixed-Fee (CPFF) contract, the fixed fee is expressed as a percentage of:

Answer: Estimated cost at the time of award

The fixed fee in a CPFF contract is established at award as a percentage of the estimated cost and does not change as actual costs vary.

Which contract type is most appropriate when the government needs a defined deliverable but cannot precisely estimate how long it will take?

Answer: Time-and-Materials (T&M)

T&M contracts are used when it is not possible to estimate accurately the extent or duration of work at the time of placing the contract.

CPFF contracts are prohibited from being used for acquisitions that exceed what simplified acquisition threshold condition?

Answer: They are prohibited for commercial items

FAR 16.301-3 prohibits the use of cost-reimbursement contracts, including CPFF, for the acquisition of commercial items.