what is the fundamental difference between a fixed-price and a cost-plus contract? course hero

On fixed-price contracts the cost is set in advance while for cost-plus contracts it is established after the project is completed. Successful firms are very careful in selecting the work to be outsourced.

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What is the difference between fixed price contracts and cost-plus contracts?

Mar 13, 2016 · One big difference is that customers have a specified price in a fixed contract while they may only have a rough estimate for a cost-plus contract. A second major difference is that cost-plus contracts are much more flexible when dealing with scope and work changes.

What is the initial period of a fixed price contract?

Jun 15, 2011 · A fixed-price contract under which the contractor agrees to perform all work specified in the contract for a fixed price. Such an agreement must have a clearly defined scope and the risk of any cost-overages is borne by the contractor. Under a cost-plus contract, the contractor is reimbursed for all direct allowable costs such as materials, labor or travel and …

When to use firm-fixed-price or fixed price contracts?

Cost-plus contract is the method when the contractor gets paid for all or most of the expenses that occurred during the project. Even the costs that were not planned on. The cost is negotiated Fixed - price contract is when there is an agreement between the contractor and customer on the price or lump sum in advance before project is started .

What is an adjustable fixed-price contract?

Mar 31, 2016 · Question 17 0.5 out of 0.5 points What is the fundamental difference between a fixed-price and a cost-plus contract? Selected Answer: On fixed-price contracts the cost is set in advance while for cost-plus contracts it is established after the project is completed Correct Answer: On fixed-price contracts the cost is set in advance while for cost-plus contracts it is …

When is a fixed price contract not used?

A fixed-price contract with economic price adjustment shall not be used unless the contracting officer determines that it is necessary either to protect the contractor and the Government against significant fluctuations in labor or material costs or to provide for contract price adjustment in the event of changes in the contractor’s established prices.

What is firm fixed price?

A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. The contracting officer may use a firm-fixed-price contract in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. The contract type remains firm-fixed-price when used with these incentives.

What is fixed price incentive contract?

A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost. Fixed-price incentive contracts are covered in subpart 16.4, Incentive Contracts. See 16.403 for more complete descriptions, application, and limitations for these contracts. Prescribed clauses are found at 16.406.

What is an economic price adjustment?

(a) A fixed-price contract with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Economic price adjustments are of three general types:

When should a contract be used?

Contracts shall be used only when the principal purpose is the acquisition of supplies or services for the direct benefit or use of the Federal Government. Grants or cooperative agreements should be used when the principal purpose of the transaction is to stimulate or support research and development for another public purpose.

What is the purpose of contracting for R&D?

The primary purpose of contracted R&D programs is to advance scientific and technical knowledge and apply that knowledge to the extent necessary to achieve agency and national goals. Unlike contracts for supplies and services, most R&D contracts are directed toward objectives for which the work or methods cannot be precisely described in advance. It is difficult to judge the probabilities of success or required effort for technical approaches, some of which offer little or no early assurance of full success. The contracting process shall be used to encourage the best sources from the scientific and industrial community to become involved in the program and must provide an environment in which the work can be pursued with reasonable flexibility and minimum administrative burden.

What is applied research?

Applied research means the effort that (a) normally follows basic research, but may not be severable from the related basic research; (b) attempts to determine and exploit the potential of scientific discoveries or improvements in technology, materials, processes, methods, devices, or techniques; and (c) attempts to advance the state of the art.

What is the purpose of development?

Development, as used in this part, means the systematic use of scientific and technical knowledge in the design, development, testing, or evaluation of a potential new product or service (or of an improvement in an existing product or service) to meet specific performance requirements or objectives.

When a sponsor’s need for the FFRDC no longer exists, the sponsorship may be transferred to one or

When a sponsor’s need for the FFRDC no longer exists, the sponsorship may be transferred to one or more Government agencies, if appropriately justified. If the FFRDC is not transferred to another Government agency, it shall be phased out.

Do non profit organizations carry insurance?

Nonprofit, educational, or State institutions performing cost-reimbursement contracts often do not carry insurance. They may claim immunity from liability for torts, or, as State institutions, they may be prohibited by State law from expending funds for insurance. When this is the case, see 28.311 for appropriate clause coverage.

What is an R&D contract?

(a) Generally, an R&D contract should be awarded to that organization, including any educational institution, that proposes the best ideas or concepts and has the highest competence in the specific field of science or technology involved. However, an award should not be made to obtain capabilities that exceed those needed for successful performance of the work.

What is fixed price contract?

Fixed price contracts involve a buyer and seller agreeing on a fixed price to be paid for a project. Also known as lump sum contracts, these contracts entail a great deal of risk for the seller, since if the project takes longer or is more extensive than anticipated, they will still only be paid the agreed-upon price.

What is an unconscionable contract?

Unconscionable contracts are contracts that are considered unjust by being unfairly weighted to give advantage to one side over the other. Examples of elements that may make a contract unconscionable include: A limit on the damages a party may receive for breach of contract. A limit on the rights of a party to seek satisfaction in court.

What is a contract in law?

A contract is a legally binding agreement between two or more parties in which an exchange of value is made. The contract’s purpose is to set out the terms of the agreement and provide a record of that agreement which may be enforceable in a court of law. Contracts may come in many forms, each with its own use and purpose.

What is express contract?

An express contract has terms that are stated expressly, or openly, in either writing or orally, at the time of contract formation. These are the kinds of contracts that most people think of when they think of contracts.

What are implied contracts?

Implied contracts, on the other hand, have terms that must be inferred by actions, facts, and circumstances that would indicate a mutual intent to form a contract.

What is a bilateral contract?

Bilateral contracts, on the other hand, involve both parties agreeing to exchange items or services of value. These are also known as two-sided contracts and are the kind of contract that is most commonly encountered.

What is an adhesion contract?

An adhesion contract is one that is drafted by a party with a great deal more bargaining power than the other party , meaning that the weaker party may only accept the contract or not. Often called “take it or leave it” contracts, these contracts lack much, if any negotiation, since one party will have little to nothing to negotiate with. Such contracts should not be confused with unconscionable contracts, since a lack of bargaining power does not necessarily mean that the terms set out will be unfair. That said, courts may still not enforce adhesion contracts if they believe a meeting of the minds never existed.