16.406
Contract clauses
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.