- This basis of payment provides for the payment to the contractor for the actual amount of time spent in performance of the work. The actual amount of time spent in performance of the work may be subject to government audit. The amount paid for these hours is calculated based on a predetermined fixed fee. Although the fixed fee does not vary with actual costs incurred, it may be renegotiated under certain circumstances. Refer to SACC Manual clause C0202C.
- Use this basis of payment when circumstances do not permit the use of a firm price or fixed time rate, and the possible savings from the use of an incentive fee are likely to be more than offset by the complexities of contract administration resulting from its use.
- The amount of the fixed fee, based on an estimate of the costs to be incurred, should be no greater than the appropriate amount of profit. If it is not possible for both parties to reach agreement on an estimate of the costs to be incurred, as a basis for calculating the fixed fee, swing points are used. Swing points are the amounts of estimated costs, one higher and one lower than the amount used for the calculation of the fixed fee, at which the fixed fee will be renegotiated.
- In a contract or part of a contract with this basis of payment, which include a ceiling price, the contractor must complete the prescribed work without additional payment, whether or not actual costs exceed the ceiling price.
When a ceiling price is used, there must be full agreement between the parties as to what constitutes the prescribed work. SACC Manual clause C6000C must be used in a ceiling price contract where it is necessary to ensure against the contractor making changes or carrying out additional work without the prior approval of the contracting officer. If it is possible to determine the prescribed work and for the parties to agree on an estimated amount to complete it as a basis for the ceiling price, it may be appropriate to use another basis of payment, that is, one which provides for a more equitable sharing of responsibilities and risks between the contractor and Canada.
- In a contract or part of a contract with this basis of payment, which does not include a ceiling price, SACC Manual clause C6001C - Limitation of expenditure must be included in the contract.