Government Contract — Line Item Types

A contract line item with a fixed price that is not subject to adjustment based on the contractor's cost experience. The contractor bears full responsibility for costs and resulting profit or loss. FFP CLINs provide maximum price certainty for the government and place the greatest performance risk on the contractor.

A contract line item that reimburses the contractor for all allowable costs incurred in performance plus a fixed fee (profit) negotiated at contract award. The fee does not vary with actual costs, providing some incentive for cost control while protecting the contractor from the uncertainty of undefined or research-oriented work.

A contract line item that reimburses the contractor for allowable costs plus a fee that is adjusted by a formula based on the relationship of total allowable costs to target cost. The fee adjustment formula provides a positive or negative incentive for the contractor to manage costs effectively, sharing cost overruns and underruns between the government and contractor.

A contract line item that pays the contractor based on fixed hourly labor rates (which include wages, overhead, G&A, and profit) plus actual cost of materials. T&M CLINs are used when it is impossible to estimate the extent or duration of work or to anticipate costs with any reasonable degree of confidence at the time of contract award.

A variation of the time-and-materials contract line item that covers only labor hours at fixed hourly rates, with no provision for materials. The contractor provides only labor services, and all materials, equipment, and facilities are government-furnished. Labor hour CLINs are subject to the same D&F requirements as T&M contracts.

A contract line item that gives the government a unilateral right to purchase additional supplies or services at a predetermined price within a specified timeframe. Option CLINs are priced at contract award but are not funded or exercised unless the government chooses to do so. They provide flexibility to extend scope without re-competing the requirement.

A contract line item representing an additional year of performance that the government may exercise at its discretion. Option years extend the period of performance beyond the base year, typically for service contracts. Most government service contracts are structured as a base year plus up to four option years, providing up to five years of total performance.

A contract line item specifically for the delivery of data and documentation required under the contract, tracked through the Contract Data Requirements List (CDRL, DD Form 1423). Data CLINs ensure that technical reports, manuals, drawings, test results, and other deliverable data items are properly priced, scheduled, and delivered as distinct contract requirements.

A contract line item that covers the cost of travel required for contract performance, typically reimbursed at actual cost in accordance with the Joint Travel Regulations (JTR) or Federal Travel Regulation (FTR). Travel CLINs separate travel costs from labor and material costs, providing visibility into travel spending and enabling the government to control travel scope.

A contract line item for direct costs that do not fall into standard labor or material categories, such as equipment purchases, software licenses, shipping, printing, and specialized testing. ODC CLINs capture miscellaneous direct costs that are necessary for contract performance but are difficult to estimate precisely at the time of award.

A contract line item where a portion of the contractor's fee is determined by the government's subjective evaluation of performance against predetermined criteria. An Award Fee Determination Board periodically assesses contractor performance and recommends fee amounts within a range from zero to the maximum award fee. This provides a powerful incentive for excellence.

A contract line item where the contractor's fee is adjusted based on achievement of objectively measurable performance targets in areas such as cost, schedule, and technical performance. Unlike award fee (which is subjective), incentive fee is calculated by predetermined formulas tied to specific metrics, providing transparent and predictable performance incentives.