SBIR Corner: FFP vs. CPFF contracts:

In the SBIR/STTR world, the single most important decision you need to make is whether you are going to bid a job as Firm Fixed Price (FFP) or as Cost plus Fixed Fee (CPFF). These are two very different contract types and the decision to use one contract type over the other is very important to the overall success of a program. If your sponsor gives you a choice on the matter, the decision to go with one contract type over the other should be well thought out prior to submitting your proposal.

A Firm Fixed Price (FFP) contract is a lot like the tag price you would find on a pair of sneakers. If the price tag on the sneakers is $54.99, then the consumer will pay $54.99 for those sneakers. No more. No less. The profit margin of those sneakers to the manufacturer is built into that price and is transparent to the buyer. Likewise, if a FFP contract to research XYZ, is $99,999, then the Government is going to pay you $99,999 for that body of research. They will not pay you any more and they will not pay you any less. It is critical in this kind of contract to nail down exactly what you are and are not going to do for that price. You do this by writing a specific Statement of Work and by carefully reviewing your deliverables during contract negotiations.

A word to the wise. This isn