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Commonly Asked Questions about Fixed Fee Contract Forms

Fixed-Price Contracts: What Are They, How They Work, and When to Use One #1: Firm Fixed-Price Contracts. #2: Fixed-Price Incentive Contracts. #3: Fixed-Price Contracts With Economic Price Adjustment. #4: Fixed Ceiling Price Contracts With Price Redetermination. #5: Firm Fixed-Price Level-of-Effort Contracts.
There are two fundamental types of contracts: Fixed-price and cost-reimbursement. Performance risk is higher for the U.S. Government under a firm fixed-price contract, while cost-reimbursable contracts place a higher cost risk on the U.S. Government.
What to include in your fixed price contract. Name and contact information of the project owner and the contractor. Legal description of the property being worked on and a detailed description of the work to be completed. Completion date and date of final payment.
A cost-plus-fixed-fee contract may take one of two basic forms-completion or term.
A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractors cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss.
To reiterate, the main types of cost-plus agreements are: Cost-plus-incentive-fee. Cost-plus-award-fee. Cost-plus-fixed-fee. Cost-plus-percent-of-cost.
A: As an example, a cost-plus contract may establish that the total estimated cost of a building project is $10 million plus a fixed fee of $1.5 million, roughly 15% of the total cost, as the contractors profit. So the total expense to the buyer would be approximately $11.5 million the cost plus the fee.