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commitment. Without the long-lead purchase and EOQ savings,
petitioner would have been at a substantial cost disadvantage.
Example (6) instructs that two orders of goods are not
interdependently priced if prices are determined independently
for the two contracts in separate negotiations. It follows that
the existence of a single-price negotiation for all items ordered
under a contract is a strong indicator that all items under the
contract are interdependently priced, as was the case with
Contract 2034.
Respondent, in effect, argues that in a fixed-price
incentive contract where actual costs of any program year's
requirements exceeded the point of total cost absorption for that
program year, profits realized in performance of other program
years could be reduced. Respondent, on brief, asks us to find
that
The “point of total cost absorption” is when, under
share ratio set by the incentive price revision clause,
it is the point at which the costs have reach[ed] the
ceiling cost, and the profit of the contractor is being
impacted and the contractor starts to incur a loss on
the contract.
Petitioner counters that
The “point of total cost assumption” is the point at
which the contractor bears 100% of the cost overruns;
this point occurs before the contractor reaches the
ceiling price. * * * In other words, at the point of
total assumption, for every dollar of overrun, the
contractor's profit is reduced by a dollar; the
contractor, however does not start to incur a loss on
the contract until the contractor's costs exceed the
ceiling price. * * * In addition, whenever the
contractor is overrunning the contract (i.e., the
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