FCC Contract Types: FFP, T&M, CPFF 3 — Questions and Answers
Question 1: A contracting officer wants to use a T&M contract. What special approval is required under FAR 16.601(d)?
- Congressional notification
- Determination and Findings (D&F) that no other contract type is suitable (Correct answer)
- Inspector General review
- SBA concurrence
Correct answer: Determination and Findings (D&F) that no other contract type is suitable
FAR 16.601(d) requires the contracting officer to execute a Determination and Findings (D&F) justifying that no other contract type is suitable before awarding a T&M contract.
Question 2: In a CPFF completion form contract, what happens to the fixed fee if the work is completed before the estimated cost is fully expended?
- The fee is prorated to actual costs spent
- The contractor still receives the full fixed fee (Correct answer)
- The fee is increased as a reward
- The fee is returned to the government
Correct answer: The contractor still receives the full fixed fee
Under a CPFF completion form, the contractor earns the full fixed fee upon completion of the specified end product, regardless of actual costs.
Question 3: Which of the following best describes the 'term' form of a CPFF contract?
- The contractor delivers a defined product for the fixed fee
- The contractor performs a level of effort over a specified period for the fixed fee (Correct answer)
- The contractor sets the fee based on deliverables accepted
- The fee is tied to achieving performance milestones
Correct answer: The contractor performs a level of effort over a specified period for the fixed fee
In a CPFF term contract, the fee is earned for performing a specified level of effort over a stated time period, not for delivering a defined end product.
Question 4: Under an FFP contract, how does the contractor maximize profit?
- By negotiating higher fees with the government mid-performance
- By reducing costs below the contract price (Correct answer)
- By submitting change orders for every scope variation
- By extending the period of performance
Correct answer: By reducing costs below the contract price
Because the price is fixed, a contractor earns more profit by controlling and reducing its actual costs below the contract price.
Question 5: Which contract type provides the LEAST incentive for contractor cost control?
- FFP
- FPIF
- CPFF (Correct answer)
- FP-EPA
Correct answer: CPFF
CPFF provides the least incentive for cost control because the contractor is reimbursed for all allowable costs and receives the same fixed fee regardless of efficiency.
Question 6: Material costs in a Time-and-Materials contract are reimbursed at:
- Fixed unit prices established at award
- Actual cost without any markup
- Actual cost plus a material handling percentage if allowed by the contract (Correct answer)
- The government's independent cost estimate
Correct answer: Actual cost plus a material handling percentage if allowed by the contract
T&M contracts reimburse materials at actual cost; a material handling percentage (not to exceed actuals) may be added if specified in the contract.
Question 7: When a requirement has well-defined specifications and stable pricing can be established, FAR policy favors which contract type?
- Cost-Plus-Fixed-Fee
- Time-and-Materials
- Firm-Fixed-Price (Correct answer)
- Labor-Hour
Correct answer: Firm-Fixed-Price
FAR 16.103(b) states that firm-fixed-price contracts are preferred when specifications are definitive and a fair and reasonable price can be established at the outset.
FCC Contract Types: FFP, T&M, CPFF 3
A contracting officer wants to use a T&M contract.
What special approval is required under FAR 16.601(d)?