Home
>
Small Business
>
FFP vs. CPFF Contracts

FFP vs. CPFF Contracts

SBIR Corner: FFP vs. CPFF contracts:

In the SBIR/STTR world, the single most important decision you need to make is whether you are going to bid a job as Firm Fixed Price (FFP) or as Cost plus Fixed Fee (CPFF). These are two very different contract types and the decision to use one contract type over the other is very important to the overall success of a program. If your sponsor gives you a choice on the matter, the decision to go with one contract type over the other should be well thought out prior to submitting your proposal.

A Firm Fixed Price (FFP) contract is a lot like the tag price you would find on a pair of sneakers. If the price tag on the sneakers is $54.99, then the consumer will pay $54.99 for those sneakers. No more. No less. The profit margin of those sneakers to the manufacturer is built into that price and is transparent to the buyer. Likewise, if a FFP contract to research XYZ, is $99,999, then the Government is going to pay you $99,999 for that body of research. They will not pay you any more and they will not pay you any less. It is critical in this kind of contract to nail down exactly what you are and are not going to do for that price. You do this by writing a specific Statement of Work and by carefully reviewing your deliverables during contract negotiations.

A word to the wise. This isn't to say that you can put a proposal together to do XYZ in which your cost is $50,000 and you sell it to the Government for $99,999. That could be considered defective pricing in accordance with the Federal Acquisition Regulation (FAR) guidelines and it also exceeds the statutory maximum profit you can make on a contract such as this.

A Cost plus Fixed Fee (CPFF) contract is a contract type that reimburses you for fair and reasonable expenses up to a certain amount (a ceiling of some sort) and then pays you a prenegotiated fixed fee above any beyond your expenses. Accordingly, your profit margin or "fee" as one should call it, is exactly that renegotiated fixed fee. No more. No less. Depending on the billing method, your fee may be paid to you as one lump sum, or on some prorated basis where you earn a portion of the fee each billing cycle. In the end, if the job is done satisfactorily, the entire fixed fee amount will have been paid or will be payable to the contractor. If your total cost on the job is less than the ceiling, then your fee will not change, if your cost on the job is more than the ceiling, then your fee will not change either. It is essential to remember that you will not receive any more or any less fee than the renegotiated amount hence the terminology "fixed fee." So, for example, if your cost ceiling is 90,000 and your fixed fee is $9,000 for a total contract value of $99,000, you will be reimbursed for your cost incurred up to, but not exceeding, $90,000 and you will receive $9,000 as a fee. If you spend more than $90,000 (and this doesn't get you in hot water with your sponsor - i.e. a default situation) you may not be reimbursed for the amount that you go over $90,000 but you will get your $9,000 fee. If you only spend $80,000 you will be reimbursed for $80,000 and you will still receive $9,000 since your fee is, you got it? fixed!

Lisa DeMaio is the president and founder of Virtual Contract Manager, LLC, which is a one-stop "information shop" for and about the Contract Management Community and the SBIR (Small Business Innovative Research) Program. Let Virtual Contract Manager coach you on how to integrate the SBIR program into your existing business. Come visit Virtual Contract Manager and get a wealth of FREE SBIR information on our Free Articles Page and to sign up for our content-rich monthly newsletter which features one article a month on the SBIR program. Let Virtual Contract Manager help you tap the federal market and help fund your research or innovative technology. http://www.virtualcontractmanager.com/

Ashley limo service .. Lockport Chicago limo O’Hare

In The News:

The FBI is warning timeshare owners of a telemarketing scam tied to a Mexican drug cartel. Tech expert Kurt “CyberGuy" Knutsson provides steps to stay safe.

Protecting your home network includes securing your router, just like your phone or laptop. Kurt “CyberGuy" Knutsson reveals six ways to protect your Wi-Fi router from hackers.

Kurt “CyberGuy" Knutsson: ConnectOnCall breach leaks sensitive data of 910,000+ patients.

Rising elder scams: How to recognize them and protect yourself and your loved ones. Tech expert Kurt “CyberGuy" Knutsson helps you outsmart the scammers.

There are common habits and oversights that could leave your financial information vulnerable to cybercriminals, according to Kurt the CyberGuy.

Counting calories just got easier with The Drop, the world's first automated nutrition tracker using advanced computer vision and artificial intelligence.

A virtual private network can help ensure your information remains security and your privacy remains intact. Kurt the CyberGuy explains.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Artificial intelligence-based cameras are giving air defense operators unprecedented capabilities in monitoring and protecting airspace.

Apple's iOS 18.1 Inactivity Reboot automatically reboots your iPhone if it hasn't been used or unlocked for more than three days, providing better data protection.

An inventor designed rooftop solar panels for a Tesla that draws solar energy while the car is parked, adding travel mileage without plugging in.

There are currently no laws governing what artificial intelligence can and cannot do with the information it gathers; here are 10 things to avoid telling AI chatbots to keep yourself safe.

A credit union with over 240,000 members recently revealed it was targeted by cybercriminals, resulting in a data breach that was part of a two-month attack by hackers.

Scammers have become skilled at creating convincing fake websites that can easily fool unsuspecting users. The CyberGuy offers tips to protect yourself.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

CAPTCHAs, which are used by websites to confirm whether users are people or bots, are harmless, but hackers are using them to infect PCs with malware.

Hackers recently leaked personal information of about 500,000 Americans and stole patient medical records that included lab results and insurance details.

The holiday season sees a rise in mobile shopping scams. Tech expert Kurt “CyberGuy" Knutsson helps you learn how to stay safe.

Tech expert Kurt “CyberGuy" Knutsson says a VPN enhances online banking security by encrypting data and protecting privacy.

Beware of these six sneaky holiday scams. Tech expert Kurt “CyberGuy" Knutsson gives you tips to avoid falling victim.

Tech expert Kurt “CyberGuy" Knutsson reveals how to securely back up and factory reset your Android to protect your privacy and data.

Artificial intelligence is making life easier for cybercriminals, allowing them to create elaborate scams to trick people. Kurt the Cyberguy explains how to protect yourself.

Cut through all the digital clutter and delete multiple emails from your Android simultaneously. Kurt the CyberGuy explains how it's done.

Tips to prevent your holiday decorations from being stolen

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.