Md. Code Regs. 21.06.03.02

Current through Register Vol. 51, No. 8, April 19, 2024

Section 21.06.03.02 - Types of Fixed-Price Contracts

A. Definitions.

(1) "Firm fixed-price contract" means a fixed price contract that provides a price that is not subject to adjustment because of variations in the contractor's cost.

(2) "Fixed-price contract" means a contract which places responsibility on the contractor for the delivery of the product or the complete performance of the services or construction in accordance with the contract terms at a price that may be firm or may be subject to contractually specified adjustments.

(3) "Fixed-price contract with price adjustment" means a fixed price contract that provides for variation in the contract price under special conditions defined in the contract, other than customary provisions authorizing price adjustments due to modifications.

B. Application.

(1) Fixed-Price Contract Generally. A fixed-price contract is appropriate for use when the extent and type of work necessary to meet State requirements can be reasonably specified and the cost can be reasonably estimated, as is generally the case for construction or standard commercial products. A fixed-price type of contract is the only type of contract that can be used in competitive sealed bidding.

(2) Firm Fixed-Price Contract. A firm fixed-price contract should be used whenever prices which are fair and reasonable to the State can be established at the outset. Bases upon which firm fixed prices may be established include:

(a) Adequate price competition for the contract;

(b) Comparison of prices in similar prior procurements in which prices were fair and reasonable;

(c) Establishment of realistic costs of performance by utilizing available cost or pricing data and identifying uncertainties in contract performance; or

(d) Use of other adequate means to establish a firm price.

(3) Fixed-Price Contract with Price Adjustment. When a fixed-price contract with price adjustment is used, the formula or other basis by which the adjustment in contract price can be made shall be specified in the solicitation and the resulting contract. Adjustment allowed may be upward or downward only or both upward and downward. Examples of conditions under which adjustments may be provided in fixed-price contracts are:

(a) Changes in the contractor's labor agreement rates as applied to the industry or areawide;

(b) Changes due to rapid and substantial price fluctuations, which can be related to an accepted index;

(c) In requirements contracts, when a manufacturer's general price change alters the base price (such as a change in a manufacturer's published price list or posted price to which a fixed discount is applied pursuant to the contract to determine the contract price) and that change affects the contractor.

Md. Code Regs. 21.06.03.02