16.206-1
Description
A fixed-ceiling-price contract with retroactive price redetermination sets a maximum price and allows the final price to be determined after contract completion, based on actual costs but not exceeding the ceiling.
Overview
FAR 16.206-1 describes the structure of a fixed-ceiling-price contract with retroactive price redetermination. This contract type sets a maximum price (ceiling) that cannot be exceeded and allows for the final contract price to be determined retroactively—after contract completion—based on actual costs incurred. The retroactive price redetermination is limited by the established ceiling price, ensuring cost control for the government while providing flexibility for contracts where costs are initially uncertain.
Key Rules
- Fixed Ceiling Price
- The contract must specify a maximum price that cannot be exceeded by the contractor.
- Retroactive Price Redetermination
- After contract completion, the final price is determined based on actual costs, but cannot exceed the ceiling price.
Responsibilities
- Contracting Officers: Must establish a reasonable ceiling price and ensure the contract includes provisions for retroactive price redetermination.
- Contractors: Must track and document actual costs to support the retroactive price determination process.
- Agencies: Should monitor contract performance and ensure compliance with ceiling and redetermination provisions.
Practical Implications
- This contract type is used when costs are uncertain at the outset but can be determined after performance.
- It helps manage risk for both parties by capping the government’s liability while allowing fair compensation based on actual costs.
- Contractors must maintain thorough cost records to support the redetermination process, and failure to do so may limit recovery to the ceiling price.