Federal activity overview — Incentive Contract
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A broad category of contracts that use incentive arrangements to motivate contractor performance in areas such as cost, schedule, and technical performance. Incentives can be objective (formula-based) or subjective (award fee).
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FAR 16.4
Appropriate when the government wants to establish profit or fee adjustment formulas tied to contractor performance metrics. Used for complex procurements where performance variation can significantly impact outcomes.
Advantages: Aligns contractor and government interests, can target multiple performance areas. Disadvantages: Complex to design and administer, requires clear performance metrics and baselines.
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Bureauify. (2026). Incentive Contract — Federal Contract Intelligence. Bureauify Federal Intelligence. Retrieved , from https://bureauify.com/glossary/incentive-contract
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