Types of Government Contracts Essay

1188 Words Feb 1st, 2011 5 Pages
The contract type (e.g., fixed-price, cost-reimbursement) is a key consideration in any decision-making because the type of contract may determine the financial impact of the decision. For example, the financial effect of schedule changes varies widely, depending on the type of contract.
This article focuses on how the type and attributes of government contracts must be considered to support successful financial performance for both the government and the contractor. Such information will be helpful to new project managers and others responsible for contract performance, as well as to more experienced managers who may benefit from a review of the basics of government contracting. The Federal Acquisition Regulation (FAR) allows
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The selection of contract type requires the consideration of many factors, as detailed in FAR 16.104. According to
FAR 16.102 (b), when necessary, it is permissible to combine contract types (i.e., firm-fixed price and cost-plus-fixed fee). The general financial arrangement
(e.g., fixed-price versus cost-reimbursement) should result in a fair distribution of the risk, considering various factors such as urgency, type, and complexity of the requirement.
Other factors may influence the selection of contract; if a contract is to extend for a long term during a time of economic uncertainty, a fixed-price with economic price adjustment contract might be more appropriate than a firm-fixed-price contract (FAR 16.104 [f]). Analogously, indefinite-delivery contracts would be appropriate when the exact times or quantities of the supplies or services required are not known at the time of contract award
(FAR 16.501–2[a]).
Considerations for Fixed-Price Contracts
Fixed-price contracting is an attempt, to the degree possible, to decouple costs from revenue. In a firm-fixed-price contract, the contractor’s costs of performance do not affect its revenue. The same is true to a lesser degree for the other types of fixed-price contracts. This means that the contractor must be very vigilant with respect to cost and schedule issues in its performance.
For example, a delay may dramatically

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