Firm fixed price (FFP) contract
Also called: FFP, fixed price contract, firm-fixed-price, lump sum
A firm fixed price contract sets a price that does not change with the contractor's actual costs; the contractor bears the full risk of overruns and keeps the full benefit of efficiency.
FFP is FAR 16.202, and FAR 16.202-2 says it is appropriate when the requirement is well defined and the risk can be priced. Commercial buys under FAR Part 12 must be fixed price or fixed price with economic price adjustment (FAR 12.207), and most state and local contracts are fixed price or unit price. Payment is on delivery or on a milestone schedule; some service contracts pay a fixed monthly amount.
What to check: that the statement of work is tight enough to price (ambiguity is your risk in an FFP), the inspection and acceptance terms that decide when you get paid, the change clause (FAR 52.243-1) so that added work becomes a priced modification, and whether an economic price adjustment clause protects you on multi-year labor or materials. Build contingency into the price rather than hoping for a change order.
What it is not: adjustable because you underbid. The price stands unless the government changes the work.
See also: Cost-reimbursement (cost-plus) contract, Time-and-materials (T&M) contract, Price volume, Wrap rate
Questions that use this term
Search allJordan, the city RFP you found is asking for a full proposal, which is a lot more than just a price sheet. You need to provide a narrative for your...
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For a small subcontractor, a firm fixed price (FFP) contract is generally safer than a cost-reimbursement (cost-plus) contract because it limits the...
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