(g) duration of the service or duration of the production period. In times of economic uncertainty, contracts that span a relatively long period of time may require economic price adjustment or price adjustment clauses. (k) the extent and nature of the proposed subcontracting. Where the contractor proposes significant subcontracting, a type of contract should be chosen that reflects the actual risks to the main contractor. (a) adjustment on the basis of fixed prices and standard deliveries. This type of contract involves the payment of actual costs, purchases or other expenses generated directly by the construction activity. Cost Plus contracts must contain specific information on a certain pre-negotiated amount (a certain percentage of material cost and labor cost) covering the contractor`s overhead and profits. Costs should be detailed and should be considered as direct or indirect costs. There are several variants of Cost Plus contracts, and the most common are: (b) prospective price fixing for subsequent performance periods at a given time or at certain periods during the performance. On the other hand, the buyer benefits from a very reasonable price in advance and even if the price increases on the basis of the contractual criteria, the buyer will still be happy since the seller has done an amazing job. 16.206-1 Description. A fixed-price contract with retroactive pricing provides for (a) a maximum fixed price; and (b) retroactive pricing in the ceiling after the conclusion of the contract.
16.206-2 Application. A fixed-price contract with retroactive pricing is appropriate for research and development contracts estimated at the simplified acquisition threshold or less if it is established from the outset that it is not possible to negotiate a fair and reasonable fixed price and that the amount and short duration of the service make it impossible to use other fixed-price contracts. (a) a maximum price is negotiated for the contract, reflecting an appropriate sharing of risk by the contractor; The maximum price fixed may be adjusted only if this proves necessary in the case of contractual clauses which, in the aforementioned circumstances, provide for an appropriate adjustment or any other modification of the contract price. (b) the contract should be awarded only after negotiation of a settlement price that is as fair and reasonable as the circumstances permit. (c) Since this type of contract does not provide an incentive for the contractor to control costs other than the maximum price, the contractor should clarify to the contractor, during the pre-award discussion, that the contractor`s efficiency and ingenuity are taken into account when retroactively revising the price. . . .