The use of firm fixed-price (FFP) contracts in product development situations have had a storied past within Defense Department contracting and elsewhere. Application of the FFP contracting strategy where product development is unproven has tended to create situations where neither the government nor the contractor has the flexibility needed to make adjustments as they learn more about what is feasible and affordable as well as what needs to be done to achieve a design that meets requirements during a product’s design and testing phases.
Frank Kendall, DoD Undersecretary for Acquisition, Technology and Logistics (AT&L) now seeks to provide guidance on this subject, including on the use of fixed-price incentive firm (FPIF) contracts.
In an article scheduled to appear in the March-April 2013 issue of Defense AT&L magazine, Kendall writes:
- “The choice of appropriate contract types is very situationally dependent, and a number of factors must be taken into account to determine the best contract type to use. From the perspective of both industry and the government, it makes a good deal of difference whether the Defense Department asks for Cost type, Fixed-Price Incentive (FPI), or Firm Fixed Price (FFP) proposals. In the original Better Buying Power (BBP) initiatives, although [Deputy Secretary of Defense] Dr. [Ashton] Carter and I encouraged greater use of FPI, we also included the caveat: ‘where appropriate.'”
The Contracting Education Academy at Georgia Tech has obtained an advance copy of Undersecretary Kendall’s full article, and it can be viewed at: Use of FPIF Contracts in Development & Production – Kendall_Mar_Apr_2013.