16.205-1
Description
A fixed-price contract with prospective price redetermination sets a firm price for an initial period, then allows for price adjustments at specified times during performance.
Overview
FAR 16.205-1 describes the structure of a fixed-price contract with prospective price redetermination. This contract type establishes a firm fixed price for an initial period of performance or deliveries, after which the price is subject to redetermination at specified times for subsequent periods. The purpose is to provide price stability at the outset while allowing for adjustments based on future conditions, making it suitable for situations where costs may change but are not fully predictable at the time of award.
Key Rules
- Initial Firm Fixed Price
- The contract must specify a firm fixed price for the initial period of performance or deliveries.
- Prospective Price Redetermination
- The contract must include provisions for redetermining the price at stated times during performance for later periods, based on agreed-upon procedures.
Responsibilities
- Contracting Officers: Must ensure the contract clearly defines the initial fixed price period and the timing and method for future price redeterminations.
- Contractors: Must comply with the initial fixed price and participate in the redetermination process as specified in the contract.
- Agencies: Should oversee that redetermination clauses are properly implemented and documented.
Practical Implications
- This contract type balances price certainty with flexibility for future adjustments, reducing risk for both parties when costs are uncertain over the contract term.
- Contractors should be prepared for periodic price negotiations and maintain records to support redetermination.
- Common pitfalls include unclear redetermination procedures or disputes over cost changes.