Federal Acquisition Regulation
Limitations
FAR 16.205-3
This contract type shall not be used unless- (a) Negotiations have established that- (1) The conditions for use of a firm-fixed-price contract are not present (see 16.202-2 ); and (2) A fixed-price incentive contract would not be more appropriate; (b) The contractor’s accounting system is adequate for price redetermination; (c) The prospective pricing periods can be made to conform with operation of the contractor’s accounting system; and (d) There is reasonable assurance that price redetermination actions will take place promptly at the specified times.
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