What characterizes a "Firm-Fixed-Price" contract?

A "Firm-Fixed-Price" contract is characterized by a price that is established at the outset and does not change over the duration of the contract. This means that the contractor agrees to deliver the specified goods or services for a predetermined price regardless of the actual costs they incur during performance. The firm-fixed-price structure provides certainty for both parties, as the government knows what it will pay, and the contractor knows how much it will receive, encouraging efficient performance and cost management on the contractor's part.

In contrast, the other choices suggest scenarios where price adjustments, renegotiations, or annual negotiations would occur. A contract that allows for adjustments based on actual costs or price renegotiation would not fit the firm-fixed-price model, which is designed to promote fixed costs and risk management for contractors without frequent changes to the established price. Hence, the defining characteristic of a firm-fixed-price contract is its stability in pricing throughout the contract's term.