NCMA Contract Types and Pricing 3

Question 1

In a Fixed-Price-Incentive-Firm (FPIF) contract, the 'ceiling price' represents:

Accepted Answer

The maximum price the government will pay regardless of the contractor's actual costs

Answer

The negotiated target price both parties expect at the start of performance

Answer

The minimum fee guaranteed to the contractor upon contract completion

Answer

The total estimated cost plus a reasonable profit margin

Question 2

Fixed-Price contracts with Economic Price Adjustment (FP-EPA) are most suitable when:

Accepted Answer

There is significant uncertainty in future labor or material costs due to volatile economic conditions

Answer

The contractor cannot estimate future costs with any reasonable degree of certainty

Answer

The contract period is short and economic conditions are expected to remain stable

Answer

The government wants to completely eliminate contractor exposure to economic fluctuations

Question 3

Cost-reimbursement contracts are generally more appropriate than fixed-price contracts when:

Accepted Answer

Significant technical uncertainties make it difficult to define requirements or estimate costs with confidence

Answer

Performance requirements are well-defined and technical risks are low

Answer

The contractor has extensive prior experience with identical or very similar work

Answer

Contract performance periods are very short with minimal uncertainty

Question 4

Under the Truth in Negotiations Act (TINA), a contractor must submit certified cost or pricing data for negotiated procurements generally exceeding:

Accepted Answer

$2,000,000

Answer

$500,000

Answer

$750,000

Answer

$1,000,000

Question 5

Defective pricing is established when the government proves that a contractor:

Accepted Answer

Submitted cost or pricing data that was inaccurate, incomplete, or noncurrent at the time of price agreement

Answer

Incurred actual costs that significantly exceeded the proposed estimate

Answer

Failed to achieve the negotiated target cost during contract performance

Answer

Did not disclose all subcontractor pricing details during negotiations

Question 6

Which contract type uses a 'share ratio' to allocate cost underruns and overruns between the government and the contractor?

Accepted Answer

Cost-Plus-Incentive-Fee (CPIF)

Answer

Cost-Plus-Fixed-Fee (CPFF)

Answer

Firm-Fixed-Price (FFP)

Answer

Time-and-Materials (T&M)

Question 7

The 'not-to-exceed' (NTE) price in a Labor-Hour contract serves to:

Accepted Answer

Set a ceiling that protects the government from unlimited cost exposure during performance

Answer

Establish the profit the contractor is expected to earn upon satisfactory completion

Answer

Define the minimum payment the government is obligated to make to the contractor

Answer

Determine the basis for calculating any incentive fee earned by the contractor