Federal activity overview — Fixed-Price Incentive (Firm Target)
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Specifies a target cost, target profit, a price ceiling (but not a profit ceiling or floor), and a profit adjustment formula. The final price is established by negotiation at completion based on actual allowable costs.
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FAR 16.403-1
Used when the contract requires a firm target and the parties can negotiate a reasonable target cost, target profit, and profit adjustment formula at the outset.
Advantages: Incentivizes cost control through shared savings/overruns, ceiling price limits government exposure. Disadvantages: Complex administration, requires accurate cost estimates.
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Bureauify. (2026). Fixed-Price Incentive (Firm Target) — Federal Contract Intelligence. Bureauify Federal Intelligence. Retrieved , from https://bureauify.com/glossary/fixed-price-incentive-firm-target
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