[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR16.205-2]

[Page 298-299]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 16--TYPES OF CONTRACTS--Table of Contents
 
                   Subpart 16.2--Fixed-Price Contracts
 
Sec. 16.205-2  Application.

    A fixed-price contract with prospective price redetermination may be 
used in acquisitions of quantity production or services for which it is 
possible to negotiate a fair and reasonable firm fixed price for an 
initial period, but not for subsequent periods of contract performance.
    (a) The initial period should be the longest period for which it is 
possible to negotiate a fair and reasonable firm fixed price. Each 
subsequent pricing period should be at least 12 months.
    (b) The contract may provide for a ceiling price based on evaluation 
of the uncertainties involved in performance and their possible cost 
impact. This ceiling price should provide for assumption of a reasonable 
proportion of the risk by the contractor and, once established, may be 
adjusted only by operation of contract clauses providing

[[Page 299]]

for equitable adjustment or other revision of the contract price under 
stated circumstances.