FAR and DFARS › FAR Part 16: Types of Contracts › Subpart 16.2
FAR 16.203-1 Description.
The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.
In plain English
This section describes a fixed-price contract with economic price adjustment, which allows the stated contract price to be revised up or down when specified contingencies occur. It lists three types of adjustments: based on established prices, actual labor or material costs, or cost indexes. It also notes that this contract type may be used with certain award-fee or performance/delivery incentives when those incentives are based solely on factors other than cost.
Applies to: Fixed-price contracts with economic price adjustment
Key terms: fixed-price contract with economic price adjustment · established prices · actual costs of labor or material · cost indexes of labor or material · award-fee incentive
Written by AI from this section's text. A guide, not legal advice: the text below rules.
The text
(a) A fixed-price contract with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Economic price adjustments are of three general types:
(1) Adjustments based on established prices. These price adjustments are based on increases or decreases from an agreed-upon level in published or otherwise established prices of specific items or the contract end items.
(2) Adjustments based on actual costs of labor or material. These price adjustments are based on increases or decreases in specified costs of labor or material that the contractor actually experiences during contract performance.
(3) Adjustments based on cost indexes of labor or material. These price adjustments are based on increases or decreases in labor or material cost standards or indexes that are specifically identified in the contract.
(b) The contracting officer may use a fixed-price contract with economic price adjustment in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. The contract type remains fixed-price with economic price adjustment when used with these incentives.
Sections it refers to
← 16.203 Fixed-price contracts with economic price adjustment. · 16.203-2 Application. →
Rule changes for FAR Part 16
- Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 16, 17, and 35 ↗ · proposed 2026-09-18 · comments due 2026-10-19
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · final rule 2025-08-27 · effective 2025-10-01
- Federal Acquisition Regulation: Protests of Orders Under Certain Multiple-Award Contracts ↗ · proposed 2025-06-12
- Federal Acquisition Regulation: Small Business Participation on Certain Multiple-Award Contracts ↗ · proposed 2025-06-12
- Federal Acquisition Regulation: Protests of Orders Under Certain Multiple-Award Contracts ↗ · proposed 2025-01-15 · comments due 2025-03-17
- Federal Acquisition Regulation: Small Business Participation on Certain Multiple-Award Contracts ↗ · proposed 2025-01-15 · comments due 2025-03-17
- Federal Acquisition Regulation: Preventing Organizational Conflicts of Interest in Federal Acquisition ↗ · proposed 2025-01-15 · comments due 2025-03-17
- Federal Acquisition Regulation: Rerepresentation of Size and Socioeconomic Status ↗ · final rule 2025-01-03 · effective 2025-01-17
Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.