Firm-Fixed-Price Contract (FFP)
A contract with a set price regardless of the contractor's actual cost.
Definition
Under FFP the contractor bears all cost risk and keeps any savings; the price is not adjusted for performance cost variance.
Why it matters
Pricing errors are unrecoverable, so estimate assumptions must be documented and defensible.
Example
A $1.2M FFP contract for annual software licensing and support.
Related terms
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