52.216-16
Incentive Price Revision-Firm Target
FAR 52.216-16 requires contractors to submit detailed cost data and quarterly reports, enabling final price negotiation and adjustment based on actual costs, with strict limits and penalties for noncompliance.
Overview
FAR 52.216-16, Incentive Price Revision-Firm Target, is a contract clause used in incentive-type contracts where the final price is subject to adjustment based on actual costs and negotiated profit. It establishes a process for revising the contract price after performance, ensuring that the final price does not exceed a specified ceiling. The clause details requirements for data submission, price negotiation, billing adjustments, quarterly reporting, and procedures for disagreements, terminations, and equitable adjustments. It also prohibits cost-plus-a-percentage-of-cost subcontracts and addresses how taxes and separately reimbursed costs are handled.
Key Rules
- Price Revision Process
- The contract price is subject to revision based on actual allowable costs and negotiated profit, but cannot exceed the ceiling price.
- Data Submission
- Contractors must submit detailed cost data, estimates, and inventory lists within a specified period after completing delivery or services.
- Quarterly Limitation on Payments
- Contractors must submit quarterly statements showing cumulative costs, profit, and payments, and refund any overpayments.
- Billing Price Adjustments
- Billing prices may be adjusted during performance based on updated cost estimates, with all changes documented by contract modification.
- Disagreements and Termination
- If parties cannot agree on the final price, the Contracting Officer issues a decision; special rules apply if the contract is terminated before price revision.
- Subcontracting Restrictions
- Subcontracts cannot be cost-plus-a-percentage-of-cost.
Responsibilities
- Contracting Officers: Insert the clause, set targets/ceilings, review data, negotiate final price, issue modifications, and enforce compliance.
- Contractors: Submit required cost data and quarterly statements, adjust billing as needed, refund overpayments, and comply with subcontracting restrictions.
- Agencies: Oversee compliance, review submissions, and resolve disputes.
Practical Implications
- This clause incentivizes cost control by sharing cost underruns/overruns between the contractor and government. Contractors must maintain accurate records and timely reporting to avoid penalties or interest on overpayments. Failure to comply with data or reporting requirements can result in financial penalties and contract disputes. The clause is critical for contracts where actual costs may vary significantly from initial estimates.