Frequently Asked Questions
What is the difference between an FP-EPA contract and a regular FP contract?
Fixed Price (FP) contracts and Fixed Price with Economic Price Adjustment (FP-EPA) contracts are both types of fixed price contracts, but they differ in their flexibility and risk management. A standard FP contract sets a firm price for a product or service, with the seller bearing the risk of any cost increases. This means that if there are any price increases, the seller is responsible for covering those increased costs and cannot charge the buyer a higher rate than the one originally agreed to pay. On the other hand, an FP-EPA contract allows for changes in the price, either positive or negative, under certain circumstances. This type of contract is designed to accommodate market fluctuations that are beyond the seller's control. Price adjustments can be made when there are market fluctuations, but these cannot exceed the price ceiling, which must be reasonable and agreed to by both parties before work begins. \ There are generally two types of price adjustments that can be made under an FP-EPA contract: adjustments based on an actual increase or decrease in costs associated with specific labor or materials, and adjustments based on standard costs or indices that are specifically laid out in the service contract.
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