What type of contract does the FAA prefer for its clarity and ease of audit?

The FAA prefers fixed rate contracts due to their clarity and ease of audit. In a fixed rate contract, the payment amount is predetermined and not subject to change regardless of the actual costs incurred by the contractor. This structure provides a clear understanding of financial obligations from the outset, making it simpler to manage and monitor throughout the contract's duration.

Moreover, fixed rate contracts facilitate easier auditing because there is a set amount associated with the services provided, allowing for straightforward verification against budgeted figures. This minimizes discrepancies and makes it easier for both the FAA and the contractors to ensure compliance with budgetary constraints and program requirements.

In contrast, cost-plus contracts involve reimbursing the contractor for their allowable costs plus a fixed fee, which can lead to a lack of clarity regarding overall project costs and potential budget overruns. Time and materials contracts can also lack clarity since they are based on the time spent and materials used, which may vary widely. Unit price contracts, while clear in scope for specific tasks priced per unit, can be complex when it comes to auditing total costs if not all units are defined and measured consistently. All of these factors highlight why fixed rate contracts are favored for their predictability and ease of tracking expenditures.