Frequently Asked Questions
When should FP-EPA contracts be used and why are they not a typical choice under normal circumstances?
Fixed Price with Economic Price Adjustment (FP-EPA) contracts are a specific type of fixed price contract that allows for price adjustments under certain circumstances. These contracts are typically used when there is reasonable doubt about the stability of certain conditions over the extended period of a project, such as market stability and labor conditions. They are particularly useful when the contingencies that would normally be included in a firm fixed price contract can't be easily identified and covered separately in that contract. However, FP-EPA contracts are not a typical choice under normal circumstances. This is primarily because they can be difficult to administer. The main difference between FP-EPA contracts and regular fixed price (FP) contracts is that FP-EPA contracts allow for special provisions for price adjustments to be made under certain circumstances. Both the buyer and the seller need to agree to these requirements at the beginning of the contract agreement to avoid confusion about when price adjustments are allowed.
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