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Types of Contracts

This document describes the main types of government contracts: fixed price contracts, cost reimbursement contracts, indefinite delivery contracts, definite quantity contracts, time and materials contracts, and letter contracts. Fixed price contracts establish a firm price for delivery of specified goods or services. Cost reimbursement contracts reimburse contractors for allowable costs up to a ceiling amount and require contractors to provide their best effort. Indefinite and definite quantity contracts specify minimum and maximum quantities of goods or services to be provided over a fixed period. Time and materials contracts pay contractors hourly rates for labor and materials plus an overhead and profit. Letter contracts authorize preliminary work with a requirement for a definitive agreement later.

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Balvinder Sahni Anand
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75 views14 pages

Types of Contracts

This document describes the main types of government contracts: fixed price contracts, cost reimbursement contracts, indefinite delivery contracts, definite quantity contracts, time and materials contracts, and letter contracts. Fixed price contracts establish a firm price for delivery of specified goods or services. Cost reimbursement contracts reimburse contractors for allowable costs up to a ceiling amount and require contractors to provide their best effort. Indefinite and definite quantity contracts specify minimum and maximum quantities of goods or services to be provided over a fixed period. Time and materials contracts pay contractors hourly rates for labor and materials plus an overhead and profit. Letter contracts authorize preliminary work with a requirement for a definitive agreement later.

Uploaded by

Balvinder Sahni Anand
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Types of Contracts

Marie E. Dodge
Acquisition Cost/Price Analyst
Types of Contracts

Firm Fixed Price


Cost Reimbursement
Indefinite Delivery
Definite Quantity
Time and Materials
Letter Contracts

2
Fixed Price Contracts

Fixed price contracts provide for a firm-


fixed-price or an adjustable price for
the performance of a contract
Contractor is required to deliver the
product specified and there is a
maximum limit on the amount of money
the government must pay

3
Types of Fixed-Price Contracts

Firm-Fixed Price Contracts


Fixed-Price Contracts with Economic
Price Adjustment
Fixed-Price Incentive Contracts
Fixed-Price Incentive (Firm Target)
Contracts

4
Types of Fixed-Price Contracts
Continued

Fixed-Price Incentive (Successive Target)


Contracts
Fixed-Price Contracts with Award Fees
Fixed-Price Contracts with Prospective Price
Redetermination
Fixed-Ceiling-Price with Retroactive Price
Redetermination Contracts
Firm-Fixed-Price, Level of Effort Term
Contracts

5
Cost Reimbursement Type
Contracts

Cost-reimbursement contract provides for


payment of the allowable incurred costs to
the extent prescribed in the contract
These type of contracts establish an
estimate of total cost for obligating funds,
which also serves as a ceiling that the
contractor may not exceed (except at its own
risk) without the approved of the contracting
officer

6
Cost Reimbursement Type Contracts
Continued

Contractor is required to deliver a “best


effort” to provide the specified product
Reserve shall not exceed 15% of total
fixed fee or $100,000, whichever is
less

7
Types of Cost Reimbursement
Contracts

Cost Contracts
Cost-Sharing Contracts
Cost-Plus-Incentive Fee
Cost-Plus-Award Fee
Cost-Plus-Fixed Fee

8
Indefinite Delivery Contracts

Provide for an indefinite quantity with


stated limits of supplies or services
during a fixed period
Requires the government to order and
the contractor to furnish at least a
stated minimum quantity of supplies or
services

9
Definite Quantity Contracts

Provides for deliver of a definite quantity of


specific supplies or services for a fixed
period, with deliveries or performance to be
scheduled at designated locations upon
order
May be used when the contracting officer
can determine in advance that (1) a definite
quantity of supplies or services will be
required and (2) the supplies or services are
regularly available

10
Time & Material (T&M) Contracts

T&M contract provide for payment based


on:
1) Direct and indirect labor, paid at specified hourly
rates that include wages, overhead, general and
administrative expenses and profit
2) Materials paid at cost including, if appropriate,
material handling costs.
These contracts must include a ceiling price
Withholding of 5% of the amounts due, but
the total amount withheld shall not exceed
$50,000

11
Letter Contracts

Is a written preliminary agreement to


commence performance on a contract
with the requirement that a definitive
price be established, usually within 6
months of the date of the letter contract

12
References

FAR 16.2 Fixed-Price Contracts


FAR 16.3 Cost-Reimbursement Contracts
FAR 16.4 Incentive Contracts
FAR 16.5 Indefinite-Delivery Contracts
FAR 16.6 Time & Material, Labor-Hour and
Letter Contracts
FAR 52.216-8 Fixed Fee
FAR 52.232-7 Payments Under T&M and Labor
Hour Contracts

13
Questions and Answers

14

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