FFP

A Firm-Fixed-Price contract provides a fixed price for supplies or services regardless of the contractor's actual costs. The contractor bears full responsibility for all costs and resulting profit or loss. FFP contracts are preferred when requirements are well-defined and costs can be reasonably estimated.

FFP contracts offer the lowest administrative burden and incentivize efficiency because any cost savings become additional profit. However, they also create risk if requirements change or costs exceed estimates. Pricing must include sufficient margin to cover uncertainties. FFP is required for commercial items and is the default contract type when conditions support its use.