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SBIR Corner: FFP vs. CPFF contracts:

In the SBIR / STTR world, the most important decision you need to do is if you go to the offer of a job as Company Fixed Price (FFP) or cost plus fixed fee (CPFF). These two types of contracts for very different and the decision to use a type of contract over another is very important to the overall success of a program. If your sponsor gives you a choice in the matter, the decision to go with one contract type over the other should be well thought out, before submitting its proposal.

A Firm Fixed Price (FFP) contract is very similar to the price you might find on a pair of sneakers. If the price of the shoes is $ 54.99, then the consumer will pay $ 54.99 for sneakers. No more. Nothing less. The profit margin of sneakers for the manufacturer is that the price and is transparent to the buyer. Similarly, if a FFP contract research in XYZ is $ 99,999, then the government will pay $ 99,999 for the body of research. They will not pay anything else and will not pay less. It is essential in this type of contract to nail exactly what they are and not going to do for that price. You can do this by writing a specific statement of work and through a careful review of its performance during contract negotiations.

A word to the wise. This does not mean that you can put a proposal together to do XYZ in which the cost is $ 50,000 and the government sells it for $ 99,999. That could be considered defective pricing under the Federal Acquisition Regulation (FAR) guidelines and also exceeds the maximum legal benefits you can do in a contract of this type.

With a margin Fixed Fee (CPFF) type contract is a contract that reimburses you for fair and reasonable costs up to a certain (maximum of some kind), and then pays a fixed pre-negotiated over that went beyond their expenses. Consequently, the profit margin or "fee" as call is exactly what fixed rate renegotiated. No more. Nothing less. Depending on the method of billing, your fee may be paid to you as a lump sum, or in some basis of assessment which had a proportion of the share of each billing cycle. In the end, if the work is done satisfactorily, all the amount of the fixed fee has been paid or are payable to the contractor. If the total cost in the workplace is below the threshold, then the rate will not change, if the cost at work is more than the ceiling, then your rate will not change either. It is essential to remember that you will not receive more or less than the amount renegotiated rate therefore, the term "fixed fee. For example, if your maximum is 90,000 cost and fixed fee is $ 9,000 for a total value of $ 99,000, incurred expenses will be paid up to but not exceeding, $ 90,000 and receives $ 9000 as payment. If you spend more than $ 90,000 (this does not lead him in hot water his sponsor – that is, a default situation) may not be reimbursed for the amount that goes over $ 90,000, but you will receive your payment of $ 9,000. If you spend only $ 80,000 will be reimbursed for $ 80,000 and will receive $ 9000 from his post is, you have to … Fixed!

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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/

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