12 Miss. Code. R. 9-14.2
Subject to the limitations herein, any type of contract which will promote the Agency's best interests may be used.
A fixed-price contract places responsibility on the contractor for the performance of the service at a price that may be firm or may be subject to contractually specified adjustments. The fixed-price contract is appropriate for use when the extent and type of work necessary to meet requirements can be reasonably specified and the cost can be reasonably estimated.
Fixed-price contracts are preferred and should be used whenever possible. However, when risks are unknown or not readily measurable, use of fixed price contracts may result in inflated prices, inadequate competition, and/or poor performance.
A firm fixed-price contract provides a price that is not subject to adjustment. It should be used whenever prices which are fair and reasonable for the life of the contract can be established at the outset.
For example, an Agency agrees to pay $200.00 per hour [fixed price] for 10 hours per week for three years. Another example is where an Agency agrees to pay $10,000.00 per month [fixed price] for four years regardless of the amount of services provided each month.
A fixed-price contract with price adjustment provides for variation in the contract price under specific conditions defined in the contract. The Agency shall define the terms and conditions of any price adjustment in the solicitation document.
For example, an Agency agrees to pay $200.00 per hour [fixed price] for 10 hours per week. In the solicitation document and the initial contract, the parties agree that upon satisfactory annual performance evaluation, the hourly rate will increase by 5% [price adjustment]. Thus, assuming the performance evaluation was satisfactory each year, the hourly rate would be $210 in the second year of the contract, $220.50 in the third year, $231.53 in the fourth year, and $243.10 in the fifth year.
A definite quantity contract is a fixed-price contract that provides for delivery of a specified quantity of services.
For example, an Agency agrees to pay $2,000.00 per month [fixed price] for a janitorial service to clean Agency bathrooms once per day every business day of the month. [definite quantity].
An indefinite quantity contract is a contract for an indefinite amount of services to be furnished at specified times, or as ordered, that establishes fixed unit prices. Generally, an approximate quantity or the best information available as to quantity is stated in the solicitation.
For example, an Agency will pay $100.00 per hour for a human resources consultant on an as-needed basis. In one month, the Agency did not require any services, in the second month the Agency required 200 hours of services, and in the third month the Agency required 40 hours of services. The Agency paid $0.00, $20,000.00, and $4,000.00 for months one through three, respectively. The solicitation for this type of contract may have evaluated the historic average use of the human resources consultant to allow offerors to develop a price.
A requirements contract is an indefinite quantity contract that obligates the procuring Agency to order its actual requirements from the Contractor on an as-needed basis during a specified period of time. This is sometimes referred to as a "stand-by" contract.
The example provided in Section 14.2.1.4 is a Requirements Contract.
A cost reimbursement contract is one in which the Agency directly reimburses the vendor for costs in addition to a fee for the personal and professional services provided. A cost reimbursement contract should be used only when such a contract is less costly to the Agency than any other type of contract or when it is impracticable to obtain the services required except under such a contract. Unless a contract specifically allows for cost reimbursement, the contract pricing shall be considered all-inclusive and does not include reimbursement for individual costs to the Contractor.
For example, in addition to the hourly rate agreed upon, the human resources consultant described in the example in Section 14.2.1.4 would also be reimbursed for expenses described in the contract such as mileage, travel, and presentation materials.
A cost-plus-a-percentage-of-cost contract is one in which, prior to beginning the work, the parties agree that the fee will be a predetermined percentage of the total cost of the work, creating a scenario in which the contractor's fee increases proportionally with increases in contract expenditures. The contractor's incentive may, therefore, be to incur cost at the expense of the Agency. Agencies are urged to avoid the use of cost-plus-a-percentage-of-cost contracts.
For example, an Agency retains a janitorial service and agrees to pay the service provider its labor costs plus an additional 25%. This type of arrangement may incentivize the vendor to overstaff the janitorial services at the Agency in order to increase its income.
Any type of contract which is in the Agency's best interest may be used.
12 Miss. Code. R. 9-14.2