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

2. Why Contract Type Matters
Episode 040
Why Contract Type Matters
Original Air Date: August 17, 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. Introduction Purpose of this podcast: “Why contract type matters?”
There are many different ‘types’ of contracts
Each has advantages and disadvantages, for specific purposes
Combined, they provide a wide range of flexible, effective contracting tools for US Government contracting officers

5. 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
Wrap-up Zone

6. Contract Types That Deal with RISK
See Episode 009 for more on Cost vs. Fixed-Price contracts
Fixed-Price Contracts
Low risk to Government
The extreme example is Firm, Fixed-Price (FFP)
Contractor fully responsible for performance costs, and resulting profit or loss

7. Contract Types That Deal with RISK
Cost-Reimbursement
High risk to Government
The extreme example is Cost-Plus Fixed Fee (CPFF)
Contractor has minimal responsibility for performance costs, and the negotiated fee (aka profit) is fixed
Features payments of “allowable costs” per the contract and FAR
Must establish an estimate of Total Cost and a Ceiling

8. Fixed-Price vs. Cost Contracts
Firm, Fixed-Price Contract
Best use of ‘basic profit motive’
“Shall” be used when risk is minimal or predictable
Cost-type Contract (Government shares risk in order to invite and sustain contractor interest)
When firm pricing does not exit
When there are many “unknowns”

9. Use Fixed-Price Contracts
When acquiring Commercial Items (FAR Part 12)
When the requirement is ‘defined’
When the need, or the industry, are mature
As often as practicable

10. Use Cost-Reimbursable Contracts
When acquiring Commercial Items (FAR Part 12)
When the requirement is not ‘clear enough’ to allow for FFP
Contract performance uncertainties do not allow enough accuracy in cost estimates to use FFP
At certain levels, the CO must document the rationale for the type used (FAR 7.1 – Acquisition Planning)

11. Some Factors in Deciding Contract Type
The job of Contracting Officer requires CRITICAL THINKING
FAR (a) – Negotiating Contract Type
Selecting the contract type is generally a matter for negotiation and requires the exercise of sound judgment
Negotiating contract type and contract prices are closely related
Looking for reasonable risk and greatest incentive for efficient and economical performance

12. Why is Contract Type important?
Contract Type is
how risk is distributed
how execution is managed
Improper (or less than optimal) assignment of contract type can endanger program performance regardless of technical risks
Basically, Contract Type provides flexibility for the Government to procure what it needs

13. Why Should Government Care?
Contract type is the structure on which results are built
If done poorly, the “shadow of the past” sucks… a LOT
Contract closeout takes MUCH longer
The best COs examine the options, then craft the perfect fit among the contract types available
This is the “thinking” part of the job
And get feedback from industry – they can “discuss”

14. Why Should Industry Care?
It’s how you know the risks and rewards
Defines how you execute
Tracking, delivering, billing, etc.
Remember that different CLINs can be different contract types! (See Episode What is a CLIN?)
If you don’t understand the contract type, you aren’t going to understand the job
It impacts how (and if) you win the contract

15. Why Should Industry Care?
It’s how you perform
It’s how you factor risk into your price
When hits the fan, “I didn’t know the contract type” is NOT an answer

16. Summary This should be mutual (Government and industry)
Know the available contract types
Know why Government chose the contract type (and influence it if you can)
If you don’t spend some time picking the right contract type, it will haunt you…
It’s how Government and Industry get the best solution
It drives the execution process

17. Contact us We are on LinkedIn, Twitter and Facebook
We also started the Government Contracting Network Group on Facebook. Join us there!
Send your topics to
For Community support, contact Shelley Hall at