FCC Contract Types: FFP, T&M, CPFF 2 — Questions and Answers
Question 1: Under a Firm-Fixed-Price (FFP) contract, who bears the risk of cost overruns?
- The government
- The contractor (Correct answer)
- Both parties share equally
- A third-party insurer
Correct 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.
Question 2: Which FAR part primarily governs the selection and use of contract types in federal procurement?
- FAR Part 12
- FAR Part 15
- FAR Part 16 (Correct answer)
- FAR Part 19
Correct answer: FAR Part 16
FAR Part 16 covers types of contracts and the policies governing their selection and use in federal acquisition.
Question 3: A Time-and-Materials (T&M) contract reimburses the contractor for direct labor at:
- Actual cost plus a negotiated fee
- Fixed hourly rates that include profit (Correct answer)
- A government-set wage determined at award
- Direct labor costs only with no overhead
Correct 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.
Question 4: What is the primary limitation that must accompany every Time-and-Materials contract at award?
- A performance bond requirement
- A ceiling price the government will not exceed (Correct answer)
- A mandatory audit clause
- A minimum order quantity
Correct 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.
Question 5: Under a Cost-Plus-Fixed-Fee (CPFF) contract, the fixed fee is expressed as a percentage of:
- Total costs incurred at completion
- Estimated cost at the time of award (Correct answer)
- Annual obligated funds
- The contractor's overhead rate
Correct 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.
Question 6: Which contract type is most appropriate when the government needs a defined deliverable but cannot precisely estimate how long it will take?
- Firm-Fixed-Price (FFP)
- Fixed-Price Incentive Firm (FPIF)
- Time-and-Materials (T&M) (Correct answer)
- Cost-Plus-Award-Fee (CPAF)
Correct 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.
Question 7: CPFF contracts are prohibited from being used for acquisitions that exceed what simplified acquisition threshold condition?
- They are never prohibited by dollar threshold
- They require special approval above $10 million
- They are prohibited for commercial items (Correct answer)
- They cannot be used for construction
Correct 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.
FCC Contract Types: FFP, T&M, CPFF 2
Under a Firm-Fixed-Price (FFP) contract, who bears the risk of cost overruns?