Evaluating Contracts
What are the benefits and drawbacks of fixed-price contracts from the perspective of a contractor?
A fixed price contract is one that the government pays a fixed amount without any adjustments. It does not consider the actual costs that the contractor will incur in completing the contract. This contract is appropriate when reasonable market prices are easily determinable in advance. This type of contract is also applicable when supplying standard issue goods such as military contingencies. The prices of such items are determinable and fixed at the beginning to the end of the contact.
The contract has the following characteristics, ...