[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR16.206-2]

[Page 298]
 
            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.  16.206-2  Application.

    A fixed-ceiling-price contract with retroactive price 
redetermination is appropriate for research and development contracts 
estimated at $100,000 or less when it is established at the outset that 
a fair and reasonable firm fixed price cannot be negotiated and that the 
amount involved and short performance period make the use of any other 
fixed-price contract type impracticable.
    (a) A ceiling price shall be negotiated for the contract at a level 
that reflects a reasonable sharing of risk by the contractor. The 
established ceiling price may be adjusted only if required by the 
operation of contract clauses providing for equitable adjustment or 
other revision of the contract price under stated circumstances.
    (b) The contract should be awarded only after negotiation of a 
billing price that is as fair and reasonable as the circumstances 
permit.
    (c) Since this contract type provides the contractor no cost control 
incentive except the ceiling price, the contracting officer should make 
clear to the contractor during discussion before award that the 
contractor's management effectiveness and ingenuity will be considered 
in retroactively redetermining the price.