Description: A firm-fixed-price (FFP) contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract.
Application: A fixed-price incentive (firm target) contract specifies a target cost, a target profit, a price ceiling (but not a profit ceiling or floor), and a profit adjustment formula. These elements are all negotiated at the outset.
Limitations: This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.
