Part 16 Types of Contracts
Source: FAR 16 on acquisition.gov
FAR Part 16 establishes the rules and procedures for selecting and administering contract types, ensuring that each acquisition uses the most appropriate structure to manage risk and achieve government objectives.
Overview
FAR Part 16, "Types of Contracts," provides a comprehensive framework for selecting and administering contract types in federal procurement. It organizes the various contract types available to contracting officers, outlines the policies and procedures for their use, and establishes the factors to consider when determining the most appropriate contract type for a given acquisition. The part is divided into subparts covering fixed-price, cost-reimbursement, incentive, indefinite-delivery, time-and-materials, labor-hour, letter contracts, and agreements, each with specific rules and requirements. The purpose is to ensure that contract type selection aligns with the government's acquisition objectives, risk management, and the nature of the work being procured.
Key Rules
- Selecting Contract Types
- Provides guidance on evaluating and choosing the most suitable contract type based on risk, price certainty, and acquisition objectives.
- Fixed-Price Contracts
- Details the use, application, and limitations of fixed-price contracts, including firm-fixed-price, economic price adjustment, and incentive structures.
- Cost-Reimbursement Contracts
- Outlines when cost-reimbursement contracts are appropriate, their limitations, and the types available (e.g., cost-plus-incentive-fee, cost-plus-award-fee).
- Incentive Contracts
- Explains the use of incentives to motivate contractor performance in cost, schedule, or technical areas.
- Indefinite-Delivery Contracts
- Covers requirements for definite-quantity, requirements, and indefinite-quantity contracts, including ordering procedures.
- Time-and-Materials, Labor-Hour, and Letter Contracts
- Describes when and how to use these flexible contract types, including their limitations and required clauses.
- Agreements
- Addresses the use of basic agreements and basic ordering agreements for recurring requirements.
Responsibilities
- Contracting Officers: Must select the contract type that best fits the acquisition, document the rationale, and ensure compliance with FAR requirements.
- Contractors: Should understand the implications of each contract type and comply with the terms and conditions specific to the awarded contract.
- Agencies: Oversee contract type selection, ensure proper documentation, and monitor contract performance for compliance and risk management.
Practical Implications
- FAR Part 16 exists to ensure contract types are chosen to balance risk, incentivize performance, and achieve best value for the government.
- It impacts daily contracting by requiring careful analysis and documentation of contract type decisions.
- Common pitfalls include misapplying contract types, inadequate documentation, and failing to align contract structure with acquisition objectives.
Subpart 16.1 - Selecting Contract Types
16.103 Negotiating contract type.
16.104 Factors in selecting contract types.
16.105 Solicitation provision.
Subpart 16.2 - Fixed-Price Contracts
16.202 Firm-fixed-price contracts.
16.203 Fixed-price contracts with economic price adjustment.
16.204 Fixed-price incentive contracts.
16.205 Fixed-price contracts with prospective price redetermination.
16.206 Fixed-ceiling-price contracts with retroactive price redetermination.
16.207 Firm-fixed-price, level-of-effort term contracts.
Subpart 16.3 - Cost-Reimbursement Contracts
16.303 Cost-sharing contracts.
16.304 Cost-plus-incentive-fee contracts.
16.305 Cost-plus-award-fee contracts.
16.306 Cost-plus-fixed-fee contracts.
Subpart 16.4 - Incentive Contracts
16.402 Application of predetermined, formula-type incentives.
16.402-2 Performance incentives.
16.402-4 Structuring multiple-incentive contracts.
16.403 Fixed-price incentive contracts.
16.403-1 Fixed-price incentive (firm target) contracts.
16.403-2 Fixed-price incentive (successive targets) contracts.
16.404 Fixed-price contracts with award fees.
16.405 Cost-reimbursement incentive contracts.
16.405-1 Cost-plus-incentive-fee contracts.
16.405-2 Cost-plus-award-fee contracts.
Subpart 16.5 - Indefinite-Delivery Contracts
16.502 Definite-quantity contracts.
16.503 Requirements contracts.
16.504 Indefinite-quantity contracts.
16.506 Solicitation provisions and contract clauses.
Subpart 16.6 - Time-and-Materials, Labor-Hour, and Letter Contracts