Firm-fixed-price contract — US FAR
A firm-fixed-price contract under the US Federal Acquisition Regulation does not adjust its price merely because the contractor’s actual performance costs differ from its estimate.
Who carries cost risk
The contractor bears the cost responsibility and resulting profit or loss. If delivery costs more than expected, that cost experience alone does not entitle the contractor to a higher contract price. Conversely, effective cost control can improve the contractor’s margin.
Not a pricing label for every change
This definition addresses adjustment based on the contractor’s costs. It should not be read as a complete rule for every contractual change or remedy. Those questions require the applicable clauses and facts.
Preparing an offer
Review the scope, assumptions, delivery obligations and foreseeable cost exposure before agreeing the price. Distinguish this arrangement from a cost-reimbursement contract, where allowable costs form the basis of payment. In FAR terminology, a contract can retain its firm-fixed-price character while including certain incentives based on factors other than cost.
Sources
Reviewed: October 27, 2026
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