Federal Contract Types

Firm-Fixed-Price

FAR 16.202

A firm-fixed-price contract provides a price that is not subject to any adjustment on the basis of the contractor's cost experience. It places maximum risk on the contractor and full responsibility for all costs and resulting profit or loss.

Fixed-Price with Economic Price Adjustment

FAR 16.203

A fixed-price contract with an economic price adjustment clause that provides for upward or downward revision of the stated contract price upon the occurrence of specified contingencies, such as changes in published price lists, material costs, or labor rates.

Fixed-Price Incentive (Firm Target)

FAR 16.403-1

Specifies a target cost, target profit, a price ceiling (but not a profit ceiling or floor), and a profit adjustment formula. The final price is established by negotiation at completion based on actual allowable costs.

Fixed-Price Incentive (Successive Targets)

FAR 16.403-2

Specifies an initial target cost, initial target profit, initial profit adjustment formula, production point at which firm targets will be negotiated, and a ceiling price. Firm targets are established later in the contract period.

Fixed-Price Level of Effort

FAR 16.207

Requires the contractor to provide a specified level of effort over a stated period of time on work that can be stated only in general terms. Payment is based on the effort expended rather than results achieved.

Fixed-Price Award Fee

FAR 16.404

A fixed-price contract with an award fee provision. The contractor earns a base amount plus an additional award fee based on periodic government evaluations of performance against subjective criteria.

Fixed-Price Prospective Price Redetermination

FAR 16.205

Provides for a firm fixed price for an initial period and prospective redetermination of the price for subsequent periods based on updated cost data. The initial period must be the longest period for which fair and reasonable pricing can be negotiated.

Fixed-Price Retroactive Price Redetermination

FAR 16.206

Provides for a ceiling price and retroactive price redetermination after completion based on actual costs. Limited to contracts where the ceiling price does not exceed $150,000 and the contract duration is short.

Cost-Plus-Fixed-Fee

FAR 16.306

Provides for payment of allowable incurred costs plus a fixed fee that does not vary with actual costs. The fee is established at inception and remains constant unless the scope of work changes.

Cost-Plus-Incentive-Fee

FAR 16.405-1

Provides for an initially negotiated fee adjusted by a formula based on the relationship of total allowable costs to total target costs. The fee adjustment formula includes a minimum and maximum fee.

Cost-Plus-Award-Fee

FAR 16.405-2

Provides for a base fee (which may be zero) plus an award fee evaluated and determined by the government based on the contractor's performance against subjective criteria in the award fee plan.

Cost (No Fee)

FAR 16.302

A cost-reimbursement contract in which the contractor receives no fee. Appropriate for research and development work performed by nonprofit organizations willing to conduct work at cost.

Cost-Sharing

FAR 16.303

A cost-reimbursement contract in which the contractor receives no fee and is reimbursed only for an agreed-upon portion of its allowable costs. The contractor absorbs the remaining costs.

Time-and-Materials

FAR 16.601

Provides for acquiring supplies or services on the basis of direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit, plus actual cost for materials.

Labor-Hour

FAR 16.602

A variation of a time-and-materials contract differing only in that materials are not supplied by the contractor. Payment is based on fixed hourly rates for direct labor hours at specified categories.

Indefinite-Delivery/Indefinite-Quantity

FAR 16.504

Provides for an indefinite quantity of supplies or services during a fixed period with a stated minimum and maximum quantity. Delivery is scheduled by placing individual task or delivery orders.

Definite-Quantity

FAR 16.502

Provides for delivery of a definite quantity of specific supplies or services for a fixed period, with deliveries or performance at designated locations upon order from the government.

Requirements

FAR 16.503

Provides for filling all actual purchase requirements of designated government activities for supplies or services during a specified contract period. The government commits to using this contractor for all of its requirements.

Letter Contract

FAR 16.603

A written preliminary contractual instrument that authorizes the contractor to begin immediately manufacturing supplies or performing services. It must be superseded by a definitive contract within a specified timeframe.

Basic Ordering Agreement

FAR 16.703

A written instrument of understanding between the government and a contractor that contains terms and clauses applying to future contracts (orders). It is not a contract itself but establishes the framework for placing orders.

Blanket Purchase Agreement

FAR 13.303

A simplified method of filling anticipated repetitive needs for supplies or services by establishing charge accounts with qualified sources. BPAs are commonly established against GSA Schedule contracts.

Basic Agreement

FAR 16.702

A written instrument of understanding between the government and a contractor that sets forth negotiated contract clauses that will apply to future contracts. Unlike a BOA, it does not contain ordering procedures.

Undefinitized Contract Action

DFARS 217.74

A contract action for which the contract terms, specifications, or price are not agreed upon before performance is begun. Most commonly used in defense acquisition when urgency demands immediate performance.

Incentive Contract

FAR 16.4

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).

Award-Term Contract

FAR 16.401(e)

An incentive contract where the contractor can earn additional periods of performance (award terms) based on excellent performance evaluations. The total contract length extends as a reward for sustained high performance.