27 Miss. Code. R. 100-3-501
This regulation section contains descriptions of types of contracts and limitations as to when they should be utilized by the State in its procurements.
Subject to the limitations of this section, any type of contract which will promote the best interests of the State may be used. A cost reimbursement contract may be used only when a determination is made in writing that such contract is to be less costly to the State than any other type of contract or that it is impracticable to obtain the services required except under such a contract. The written determination shall be maintained in the procurement file.
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. Thereby, the more the contractor spends, the greater its fee and the contractor's incentive may, therefore, be to incur cost at the expense of the State and not to economize. Agencies are urged to avoid the use of cost-plus-a-percentage-of-cost contracts.
The selection of an appropriate contract type depends on factors such as the nature of the services to be procured, the uncertainties which may be involved in contract performance, and the extent to which the State or the contractor is to assume the risk of the cost of performance of the contract. Contract types differ in degree of responsibility assumed by the contractor.
The objective when selecting a contract type is to obtain the best value in needed services in the time required and at the lowest cost or price to the State. In order to achieve this objective, the Procurement Officer, before choosing a contract type, should review those elements of the procurement which directly affect the cost, time, risk, and profit incentive bearing on the performance.
Among the factors to be considered in selecting any type of contract are:
Note:It is self-defeating for the State to select a type of contract that would place an unreasonable economic risk on the contractor, since such action may tend to jeopardize satisfactory performance of the contract.
The provisions of Section 3-501 describe and define the principal contract types. Any other type of contract may be used provided the Agency Head and the PSCRB determine that such use is in the State's best interest.
A fixed-price contract places responsibility on the contractor for the performance of the service in accordance with the contract terms 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. A fixed-price type of contract is the only type of contract that can be used in competitive sealed bidding.
Note:Fixed-price contracts are preferred for use in procurements and should be used whenever possible; however, when risks are unknown or not readily measurable in terms of costs, the use of such contracts can result in inflated prices and inadequate competition, poor performance, disputes, claims when performance proves difficult, or excessive profits when anticipated contingencies do not occur.
A firm fixed-price contract provides a price that is not subject to adjustment because of variations in the contractor's cost of performing the work specified in the contract. It should be used whenever prices which are fair and reasonable to the State can be established at the outset. Bases upon which firm fixed prices may be established include:
A definite quantity contract is a fixed-price contract that provides for delivery of a specified quantity of services either at specified times or when ordered.
An indefinite quantity contract is a contract for an indefinite amount of services to be furnished at specified times, or as ordered, that establishes unit prices of a fixed-price type. Generally an approximate quantity or the best information available as to quantity is stated in the solicitation. The contract may provide a minimum quantity the State is obligated to procure and may also provide for a maximum quantity provision that limits the State's obligation to procure.
A requirements contract is an indefinite quantity contract for services that obligates the State to order all the actual requirements of designated agencies during a specified period of time. The obligation to order the State's actual requirements is limited only by provisions of Mississippi Code Annotated § 31-7-12(1). For the protection of the State and the contractor, requirements contracts shall include the following:
27 Miss. Code. R. 100-3-501