What is the characteristic of a Firm-Fixed-Price contract?

In a Firm-Fixed-Price contract, the contractor assumes all the financial risk associated with the costs of the contract performance. This means that the price of the contract is established at the outset and does not change, regardless of the actual costs incurred by the contractor while fulfilling the contract. If the costs to complete the work exceed the fixed price, the contractor must absorb those additional costs. This structure incentivizes the contractor to control costs and work efficiently, as they are not able to pass any overages on to the government or seek additional funds once the contract is awarded.

Other options suggest various risk distributions or payment conditions that do not apply to this type of contract, which is strictly defined by its fixed price nature and the contractor's responsibility for managing costs effectively. Thus, the characteristic of bearing all the risk is a defining trait of Firm-Fixed-Price contracts.