What Is an Ffp Loe Contract

The old simple FFP contract is suitable if you want the contractor to do a job that is in a natural state of completion: cleaning the floor. Repair the toaster. Bake a cake. Build a house. The government can easily indicate when these tasks have been completed and when the contractor`s obligation has been fulfilled. A fixed-price contract (FFP) (subpart 16.2 of the FAR) provides for a price that is not subject to adjustment based on the contractor`s experience with costs in performing the contract. This type of contract represents for the contractor the maximum risk and full responsibility for all costs and the resulting profit or loss. It provides maximum incentives for the contractor to control costs and operate efficiently and imposes a minimal administrative burden on the parties. What are the main differences between FFP and FPLOE contracts? An FFP contract is suitable for the acquisition of commercial goods or the acquisition of other supplies or services on the basis of sufficiently specific functional or detailed specifications, if the customer can set fair and reasonable prices from the outset. B for example if: (FAR Subpart 16.202-2) I agree that an hours of work (LH) contract is reasonable if the working hours required to perform the work and/or work mix are very uncertain and speculative. On the other hand, a fixed-price effort level (LPCF) may be appropriate if the effort level can be determined and agreed UPON BEFORE the contract is awarded.

According to FAR 16.207, this type of contract is suitable for research and development surveys or studies. Another limitation of a LSPF (see FAR 16.207-3(c)) is that this type can only be used if “there is reasonable assurance that the expected result cannot be achieved by spending less than the specified effort”. In the general information of the AAP, you mentioned that it is not clear how many hours it will take to do the work. Therefore, it seems unlikely that you will be able to agree in advance on the total effort required for the assignment of the task. In addition, the FAR stipulates that a LSPF works best when the effort results in the contractor presenting a result such as a research study or report at the end of the contract. From your basic information, it seems that the work done is more open without results or reports at the end. For these reasons, it does not appear that the FPLOE is suitable for the assignment of the task in question. Both types of contracts provide for the payment of a fixed price. The difference lies in the nature of the contractor`s obligation. Under an old simple fixed price contract, FAR 16.202, the contract is required to perform certain work in order to be entitled to payment of the fixed price. Under a fixed-price contract with duration FAR 16.207, the contractor is required to perform certain work within a certain period of time until it has passed a fixed effort (usually a certain number of hours), at which time its obligation is terminated and it is entitled to payment of the fixed price.

Both contracts contain the payment clause for far payments 52,232-1 (APR 1984) or 52,232-2, payments under fixed-price research and development contracts (APR 1984). From mw35019, 25. May 2012 in The management of subcontracts and subcontracts The agent may use a fixed-price contract in conjunction with an incentive for additional costs (see FAR Subaprt 16.404) and incentives for performance or delivery (see 16.402-2 and 16.402-3) if the additional costs or incentive are based solely on factors other than cost. The type of contract remains a fixed price when used with these incentives. The FFP-LOE contract is appropriate if you want the contractor to perform work for which there is no natural state of completion, and the only practical way to specify the contractor`s obligation is to set a certain number of hours of work. For example, suppose the Department of Agriculture wants a contractor to study the impact of the spread of fire ants on southern agriculture. Well, there is no natural end state for this company. This could last indefinitely without achieving a conclusive result. Then the department says to the contractor: Devote 10,000 hours of entomologist and economist research to studying the effects of the spread of fire ants on southern agriculture and report what you learn no later than dd-mm-y. When the entrepreneur completes the study, he gives up everything he has learned (usually in the form of a research report) and the government pays the fixed fixed price. The Contractor is entitled to a payment if it (1) has completed the required number of hours, (2) performed the specified type of work and (3) completed the work on time. An alternative to assigning the entire task assignment as LH could be to configure an FFP-CLIN or CLIN for base hours by work category in the order of tasks.

You must be able to reach an agreement with the contractor on a minimum number of base hours for each category of work. Then configure an LH wink or CLIN for the hours of power surge and/or overrun for one of the work categories of the task order. The government should be reasonably certain that the negotiated base hours are the minimum required to perform the work required under the mission. One problem with this approach is that you probably won`t be able to get the contractor`s actual working hours under FFP CLINs unless progress payments are allowed for task assignment. The reason LH is not preferred is that the government assumes the risks associated with an LH contract, which benefits when the actual cost is lower than the expected cost, or loses if the work cannot be completed within the expected cost of performance. In addition, it is more likely that the government will pay too much or not get what we paid for an LH contract, unless it has rigorous oversight to ensure the contractor`s effective performance. Finally, it is highly recommended that you contact your local contract agent and legal advisor for their interpretation and advice on the best way forward. First of all, let`s find the right names: fixed fixed price (FFP) and fixed fixed price, degree of effort (FFP-LOE).

Website: Far Subpart 16.2 – Fixed Price Contracts. .