The 5 major types of Government Contracts are Fixed Price Contracts, Time and Materials Contracts, Cost-Reimbursement Contracts, Incentive Contracts and Indefinite Delivery & Quantity (IDIQ) Contracts.
1. Fixed-Price Contracts (more risk to the contractor)
• Contract Price is set (fixed) and does not usually change.
• Used by all federal agencies; also common in state and local procurements.
• Used when the contract risk is relatively low and the contractor can deliver within budget outlined (i.e., Production of established parts).
• The most common variations of Fixed-Price Contracts include:
a) Firm-Fixed-Price (FFP) or Firm-Fixed-Price, Level-Of-Effort (LOE) Term Contract
b) Firm-Fixed-Price (FFP) Materials Reimbursement
c) Fixed-Price Contract with Economic Price Adjustment
d) Fixed-Price Incentive (FPI - profit to contractor increases per agreed to formula, if certain goals are met)
2. Time & Materials Contracts (less risk to the contractor)
• A full-burdened per hour labor rate is established.
• This is a hybrid of a fixed-price and a cost-reimbursement contract.
• Supplies and services are purchased based on direct labor hours at specifically fixed loaded rates (including wages/overhead/profit) and real material costs.
• A price ceiling is established; but can be renegotiated.
3. Cost-Reimbursement Contracts/Cost Plus Contracts (least risk to contractors)
• Contractor bills for all its allowable expenditures up to an agreed-upon limit (approved funded amount).
• Contractors are reimbursed for specific allowable costs, detailed within the initial contract, on an agreed to scope of work. The initial contract includes a total sum to be paid to the government contractor and ceiling that the contractor cannot exceed (without taking on that financial obligation/risk) without the contracting officer's consent.
• More likely to be for research and development of new products, than for established goods or services.
• Subcategories include cost-plus-fixed-fee (CPFF), cost-plus award fee (CPAF), and cost-plus incentive fee contracts.
• Government contractor puts forth maximum effort to complete the obligations of the contract.
• Used by Department of Defense, Federal Transit Administration, and others.
4. Incentive Contracts
• Both cost-reimbursement contracts and fixed-price contracts may have added incentives.
• Due to potential for traffic or work disruption, government may award an incentive contract to a business that can complete the project more quickly.
• Bonuses or incentives may be awarded to companies who complete contracts ahead of schedule, or meet other established goals.
5. Indefinite Delivery & Quantity (IDIQ) Contracts
• Also known as Task Order Contracts or Delivery Order Contracts
• Used when the government agency is not sure of quantity of material they need, or the timeline the project requires.
• These contracts are flexible and adaptable - can be used on both a fixed-price and cost-reimbursement basis.
• One of the most common types of government contracts.
• Can take the form of agency specific contracts, or multi-agency contracts under a government-wide acquisition contract.
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