Are Fixed-Price Redetermination contracts generally considered to be prospective or retrospective?

Fixed-Price Redetermination contracts are generally considered to be both prospective and retrospective in nature.

These contracts are structured to allow initial pricing to be established, providing cost predictability at the outset. However, they also include provisions for future adjustments based on changes in conditions or performance metrics over the term of the contract. The initial price is determined based on estimates of costs at the start, but as the contract progresses, the price may be reviewed and adjusted to reflect actual costs incurred, which is where the retrospective aspect comes into play.

This balancing act allows both parties to navigate uncertainties inherent in long-term contracts. The prospective aspect refers to how the final price can be influenced by future expectations, while the retrospective aspect accounts for actual costs incurred that may justify price changes. Therefore, Fixed-Price Redetermination contracts embody elements of both prospective and retrospective pricing mechanisms.