Glossary term
Firm-Fixed-Price (FFP)
A contract type where the price is set at award and does not change regardless of the contractor's actual costs.
A firm-fixed-price contract places maximum risk and full responsibility for costs on the contractor. If the work costs more than expected, the contractor absorbs the loss; if it costs less, the contractor keeps the difference. FFP is the government's preferred contract type for commercial items and well-defined requirements, and it requires no cost-accounting system approval. It is the most common type a small business will encounter first.
Categories
- contract-types
Related terms
- Cost-Plus-Fixed-Fee (CPFF)A cost-reimbursement contract where the contractor is repaid allowable costs plus a negotiated fee that does not vary with actual cost.
- Time-and-Materials (T&M)A contract type paying fixed hourly labor rates plus materials at cost, used when the extent of work cannot be estimated with confidence.
- FAR (Federal Acquisition Regulation)The primary regulation governing federal executive-agency purchasing — codified at 48 CFR Chapter 1.