1. Contracting Officer Podcast Slides
Knowledge & Insights From Contracting Officers

2. What are Contract Types?
Episode 009
What are Contract Types?
Original Air Date: January 11, 2015
Hosts: Kevin Jans & Paul Schauer

3. Formatting notes
Hyperlinks: Blue font indicates hyperlinks – presentation must be in ‘Slide Show’ mode to activate the link
Red bold font indicates a point of emphasis
Green bold font indicates CO’s personal comment or perspective

4. Overview What are the Types of Contract?
When does the Contract Type matter?
What is the FAR Reference?
Areas NOT included in this discussion

5. What are the Contract Types?
Two basic types:
Fixed Price – How almost everything is purchased
Cost Reimbursement – Pure Cost Reimbursable is pretty unique to Government purchasing
Hybrid – Time and Materials

6. Firm Fixed Price Contracts
By far, the most common type of contract
Purchases based on features and price
No insight into profit levels
More sophisticated buys may involve the Government requiring ‘cost and pricing’ data to ensure that profit is reasonable (not excessive)

7. Cost-Reimbursable Contracts
Proposal is the estimate of the cost of performance
Contractor must be able to properly track and bill actual costs
Government requires complete insight into contractor’s accounting system
Certified Cost and Pricing Data
Audit of financial record-keeping systems and the records themselves

8. Time and Materials Contracts
Fixed price for labor (time)
Cost-reimbursable for materials
Example: Painting a house
Not a pure fixed-price contract type

9. Time and Materials Contracts
When does the Contract Type matter?
Considered by Government in Requirements Zone (Acquisition Strategy)
Considered by both Government and Industry in Market Research Zone (RFI, Draft RFP, Industry Days, etc.)
Finalized for the RFP Zone

10. When does the Contract Type happen?
Acquisition Time Zones
(from Podcast Episode 003)
Requirements Zone
Market Research Zone
RFP Zone (proposal zone)
Source Selection Zone
Execution Time Zones
(from Podcast Episode 084)
Kick Off Zone
Performance Zone
Re-compete Zone (well, sort of… )
Wrap-up Zone

11. FAR Reference: Part 16 – Types of Contracts
FAR Part 16.1 – Selecting Contract Types
– General
(a) Contract types vary according to:
The degree and timing of the responsibility assumed by the contractor for the costs of performance; and

(2) The amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.

12. FAR Reference: Part 16 – Types of Contracts
(b) The contract types are grouped into two broad categories: fixed-price contracts (see Subpart 16.2) and cost-reimbursement contracts (see Subpart 16.3). The specific contract types range from firm-fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit (or loss), to cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee (profit) is fixed. In between are the various incentive contracts (see Subpart 16.4), in which the contractor’s responsibility for the performance costs and the profit or fee incentives offered are tailored to the uncertainties involved in contract performance.

13. FAR Reference: Part 16 – Types of Contracts
FAR – Firm-Fixed-Price Contracts A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.

14. FAR Reference: Part 16 – Types of Contracts
FAR – Cost-reimbursement Contracts Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

15. FAR Reference: Part 16 – Types of Contracts
FAR – Time and Materials Contracts
(b) A time-and-materials contract provides for acquiring supplies or services on the basis of—
(1) Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and
(2) Actual cost for materials (except as provided for in Subpart (e) and (f)).

16. Areas NOT Included in This Discussion
When to use certain contract types, or when a CO can use a certain type
Incentive-type contracts
Administering the various types of contracts

17. Summary Two basic contract types
Firm-Fixed Price – Most common type, no insights on profit
Cost-Reimbursable – Mostly found in Government, requires profit disclosure
Finalized in RFP Zone, but considered in Requirements and Market Research Zones
Covered in FAR Part 16

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