Which term is used to describe a pricing approach that allows price changes at a future date according to a preselected method?

Which term is used to describe a pricing approach that allows price changes at a future date according to a preselected method?

• A. Fixed Price Re-determination
• B. Price In Effect At Time Of Shipment
• C. Cost Plus Fixed Fee
• D. Proposal Risk

Answer: (A)

The main idea is a pricing arrangement that fixes the price but allows it to be adjusted later using a prearranged method. The term for this is fixed-price re-determinable. In this setup, the contract sets a price at award but includes a mechanism to adjust that price at a future date based on a predetermined formula or method—such as an escalation clause or an index-based adjustment. This gives price certainty at the start while providing a defined way to reflect changes in inputs like materials or labor when the future date arrives. The adjustment method is specified in the contract, so both parties know exactly how the new price will be calculated. For example, if the contract ties changes to a specific cost-index, the price will be re-determined according to the index at the designated future date. By contrast, pricing that is in effect at time of shipment simply uses the price prevailing at shipment with no future adjustment; cost-plus fixed fee is a reimbursement contract with a fixed fee rather than a price that can be re-determined later; and proposal risk concerns how risk is allocated in competitive bidding rather than describing a price adjustment mechanism.

The main idea is a pricing arrangement that fixes the price but allows it to be adjusted later using a prearranged method. The term for this is fixed-price re-determinable. In this setup, the contract sets a price at award but includes a mechanism to adjust that price at a future date based on a predetermined formula or method—such as an escalation clause or an index-based adjustment. This gives price certainty at the start while providing a defined way to reflect changes in inputs like materials or labor when the future date arrives. The adjustment method is specified in the contract, so both parties know exactly how the new price will be calculated. For example, if the contract ties changes to a specific cost-index, the price will be re-determined according to the index at the designated future date. By contrast, pricing that is in effect at time of shipment simply uses the price prevailing at shipment with no future adjustment; cost-plus fixed fee is a reimbursement contract with a fixed fee rather than a price that can be re-determined later; and proposal risk concerns how risk is allocated in competitive bidding rather than describing a price adjustment mechanism.