12.207
Contract type
Firm-fixed-price or fixed-price with economic price adjustment contracts are required for commercial acquisitions, with time-and-materials or labor-hour contracts allowed only under strict, documented conditions.
Overview
FAR 12.207 establishes the permissible contract types for acquiring commercial products and commercial services. The regulation prioritizes the use of firm-fixed-price (FFP) or fixed-price with economic price adjustment (FP-EPA) contracts, but allows time-and-materials (T&M) or labor-hour (LH) contracts for commercial services under specific, controlled circumstances. It also addresses requirements for indefinite-delivery contracts and prohibits the use of unauthorized contract types for commercial acquisitions.
Key Rules
- Preferred Contract Types
- Agencies must use FFP or FP-EPA contracts for commercial acquisitions, except as provided for T&M/LH contracts under strict conditions.
- Use of T&M/LH Contracts
- T&M or LH contracts for commercial services are permitted only when competitive procedures are used, a detailed determination and findings (D&F) is executed, and a ceiling price is set. Additional analysis and documentation are required for any ceiling price increases.
- D&F Requirements
- The D&F must justify why no other contract type is suitable, include market research, and outline steps to maximize fixed-price use in the future.
- Indefinite-Delivery Contracts
- These may use FFP, FP-EPA, or T&M/LH pricing, but must be structured to allow FFP/FP-EPA orders when practicable, with D&Fs required for each T&M/LH order.
- Prohibition of Unauthorized Types
- Only contract types authorized by this subpart may be used for commercial acquisitions.
Responsibilities
- Contracting Officers: Must select the appropriate contract type, execute and document D&Fs for T&M/LH contracts, set ceiling prices, analyze and document any ceiling price increases, and ensure compliance with approval and documentation requirements for indefinite-delivery contracts.
- Contractors: Must comply with contract terms, especially regarding ceiling prices and risk for exceeding them.
- Agencies: Must oversee contract type selection, ensure D&F adequacy, and enforce prohibitions on unauthorized contract types.
Practical Implications
- This section ensures commercial acquisitions use contract types that best manage risk and cost to the government. T&M/LH contracts are tightly controlled to prevent misuse. Failure to follow these requirements can result in improper contract awards, increased oversight, or protest risk. Contracting professionals must be diligent in documentation and justification when deviating from preferred contract types.