188 | Page Public Services and Procurement Canada January 2022
Main Risk
Category
Description Impact
Economic Price Adjustment (EPA) or
Foreign Currency Adjustment (FCA)
clause (Section 4.2) does not require a
change to the contractual risk factor.
The EPA/FCA clause provides
contractors with protection for
fluctuations outside their control.
to the contractor that the costs would be
higher than planned, resulting in an
increase in the contractual risk factor.
Cost-Reimbursable Type
Minimal impact in a cost-reimbursable
contract as the risk of fluctuations in
costs is born by the Government of
Canada.
R4. Timing of Negotiations
The timing of price and fee negotiation
has an impact on the accuracy of the
costs and price estimated. Contract
prices determined before the contract
start date, and for Fixed Time/Unit Rate
contracts before the start of a contract
year, rely on estimates and
uncertainties, which results in a higher
level of risk.
Contract prices determined after a
contract has started and for Fixed
Time/Unit Rate contracts after the start
of a contract year, when a significant
portion of the work has been completed
to reasonably understand inputs and
related costs, have a lower level of risk.
If a substantial portion of the costs have
been incurred prior to the finalization of
contract prices or rates, the contracting
officer may assign a value as low as
zero percent, regardless of Basis of
Payment type.
Fixed Price/Rate Type
Standard risk conditions rely on a
contract being negotiated prior to the
commencement of a contract and for
Fixed Time/Unit Rate contracts before
the start of a contract year. The
contractual risk rate will decrease when
the prices and rates are negotiated after
a contract or contract year has started (in
arrears) and inputs and actual costs are
known. With this factor, a Fixed
Price/Rate contractual risk factor can go
below the normal range as the contract
price being negotiated is now actual
costs plus a fee, reducing the cost
uncertainty and risk to that of a cost-
reimbursable contract.
For example, in a Fixed Time Rate
contract where costing rates are
negotiated annually in arrears, there will
typically be no cost risks, as the contract
would essentially be cost-reimbursable in
nature. The contractual risk portion of
profit should be decreased accordingly.
Regular assessments of contractual risk
factors should be conducted in line