Types of Contracts
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.