Overview
This section details a specialized contract type for small-scale research and development projects where a final price is negotiated after the work is completed, provided it does not exceed a predetermined maximum ceiling.
Key Rules
- Scope and Threshold: Usage is strictly limited to Research and Development (R&D) contracts estimated at or below the Simplified Acquisition Threshold (SAT).
- Pricing Structure: The contract must include a negotiated fixed-ceiling price (representing a reasonable risk-sharing) and an initial "billing price" for interim payments.
- Retroactive Adjustment: The final price is determined after contract completion; however, it can never exceed the established ceiling unless adjusted via formal equitable adjustment clauses.
- Accounting Requirements: The contractor must maintain an accounting system adequate to support the retroactive price redetermination process.
- Mandatory Approvals: This contract type requires written approval from the Head of the Contracting Activity (HCA) or a higher-level official.
- Management Consideration: Because there are no profit-based cost incentives, the Contracting Officer must evaluate the contractor's management effectiveness and ingenuity during the redetermination process.
Practical Implications
- This contract type is a "last resort" for low-dollar, high-risk R&D where a Firm-Fixed-Price cannot be established and other contract types are too cumbersome for the short performance period.
- Contractors must be prepared for post-performance audits or financial reviews, as the final payment depends entirely on the retroactive price redetermination conducted after the work is finished.