16.406 Contract clauses
Source: FAR 16.406 on acquisition.gov
FAR 16.406 mandates the use of specific clauses for each type of incentive contract to ensure proper contract administration and compliance.
Overview
FAR 16.406 prescribes the mandatory contract clauses for various types of incentive contracts, ensuring that the appropriate terms are included in solicitations and contracts based on the contract structure. It specifies which FAR clauses to use for fixed-price incentive (firm target and successive targets), cost-plus-incentive-fee, and award-fee contracts, including when to use alternates and how to ensure compatibility with other required clauses.
Key Rules
- Fixed-Price Incentive (Firm Target) Contracts
- Use clause 52.216-16; use Alternate I if pricing is subject to incentive revision under provisioning documents or options.
- Fixed-Price Incentive (Successive Targets) Contracts
- Use clause 52.216-17; use Alternate I under similar conditions as above.
- Cost-Plus-Incentive-Fee and Cost-Plus-Award-Fee Contracts
- Use clause 52.216-7 for allowable cost and payment.
- Cost-Plus-Incentive-Fee Contracts
- Use clause 52.216-10 for incentive fee provisions.
- Award-Fee Contracts
- Insert an agency-approved award-fee clause that is compatible with 52.216-7 and states that award and methodology are at the Government’s sole discretion.
Responsibilities
- Contracting Officers: Must insert the correct clauses and alternates as prescribed, ensure compatibility, and use agency-approved language for award-fee contracts.
- Contractors: Must comply with the terms and methodologies set forth in the applicable clauses.
- Agencies: Must approve or prescribe award-fee clauses and ensure regulatory compliance.
Practical Implications
- Ensures incentive contracts are structured with clear, enforceable terms.
- Reduces risk of disputes by standardizing clause usage.
- Contractors must understand which clauses apply to their contract type and the implications for pricing, payment, and award determinations.
(a) Insert the clause at 52.216-16, Incentive Price Revision-Firm Target, in solicitations and contracts when a fixed-price incentive (firm target) contract is contemplated. If the contract calls for supplies or services to be ordered under a provisioning document or Government option and the prices are to be subject to the incentive price revision under the clause, the contracting officer shall use the clause with its Alternate I.
(b) Insert the clause at 52.216-17, Incentive Price Revision-Successive Targets, in solicitations and contracts when a fixed-price incentive (successive targets) contract is contemplated. If the contract calls for supplies or services to be ordered under a provisioning document or Government option and the prices are to be subject to incentive price revision under the clause, the contracting officer shall use the clause with its Alternate I.
(c) The clause at 52.216-7, Allowable Cost and Payment, is prescribed in 16.307(a) for insertion in solicitations and contracts when a cost-plus-incentive-fee contract or a cost-plus-award-fee contract is contemplated.
(d) The clause at 52.216-10, Incentive Fee, is prescribed in 16.307(d) for insertion in solicitations and contracts when a cost-plus-incentive-fee contract is contemplated.
(e) Insert an appropriate award-fee clause in solicitations and contracts when an award-fee contract is contemplated, provided that the clause-
(1) Is prescribed by or approved under agency acquisition regulations;
(2) Is compatible with the clause at 52.216-7, Allowable Cost and Payment; and
(3) Expressly provides that the award amount and the award-fee determination methodology are unilateral decisions made solely at the discretion of the Government.