16.206-3 Limitations
Source: FAR 16.206-3 on acquisition.gov
Fixed-ceiling-price contracts with retroactive price redetermination are only allowed for small R&D projects with proper accounting systems and require written approval from senior contracting officials.
Overview
FAR 16.206-3 outlines the strict limitations for using fixed-ceiling-price contracts with retroactive price redetermination. This contract type is only permitted under specific circumstances, primarily for research and development (R&D) contracts where the estimated cost does not exceed the simplified acquisition threshold. Additionally, the contractor must have an adequate accounting system to support price redetermination, there must be confidence that the price redetermination will occur promptly at the agreed time, and written approval from the head of the contracting activity (or a higher-level official, as required) is mandatory. These limitations are designed to ensure that this contract type is used only when appropriate controls and oversight are in place, minimizing risk to the government and ensuring fair pricing.
This contract type shall not be used unless-
(a) The contract is for research and development and the estimated cost is the simplified acquisition threshold or less;
(b) The contractor’s accounting system is adequate for price redetermination;
(c) There is reasonable assurance that the price redetermination will take place promptly at the specified time; and
(d) The head of the contracting activity (or a higher-level official, if required by agency procedures) approves its use in writing.