Types of Contract
Types of Contracts
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Choosing type appropriate contract type is essential to successful performance under a contract. The type of contract determines the cost and performance risks which are placed on the contractor. There are two broad contract groups--fixed price and cost reimbursement. Within each of these groups, there are various types of contracts which can be used individually or in combination.
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Firm Fixed Price Contracts
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This type of contract requires the contractor to successfully perform the contract and deliver conforming supplies or services for a price agreed to up front. This type of contract places the most performance and cost risk paid. It if costs them more than they expected, they still get the amount originally agreed upon. If it costs them less, they make more profit. A firm-fixed price contract is suitable for supplies and services that can be described in sufficient detail to ensure complete understanding of the requirements by both parties and assessment of the inherent risks of performance.
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Other Fixed Fixed Price Contracts
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Within the fixed price contract group you can award contracts with: • economic price adjustment factors to allow for industries where costs fluctuate frequently either up or down • various incentive types which can be used to reward good performance or to impose provisions to deduct for poor performance • price redetermination provisions which permit issuing an order on a fixed price basis and allow for revisiting the reasonableless of that pricing later during the contract performance • a specified level of effort
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Cost Reimbursement Contracts
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A cost reimbursement contract allows for payment of all incurred costs, within a predetermined ceiling, that can be allocated to the contract, areallowable within cost standards, and reasonable. Therefore, all types of cost reimbursement contracts place the least cost and performance risk on the contractor.
[pic]
Choosing type appropriate contract type is essential to successful performance under a contract. The type of contract determines the cost and performance risks which are placed on the contractor. There are two broad contract groups--fixed price and cost reimbursement. Within each of these groups, there are various types of contracts which can be used individually or in combination.
[pic]
Firm Fixed Price Contracts
[pic]
This type of contract requires the contractor to successfully perform the contract and deliver conforming supplies or services for a price agreed to up front. This type of contract places the most performance and cost risk paid. It if costs them more than they expected, they still get the amount originally agreed upon. If it costs them less, they make more profit. A firm-fixed price contract is suitable for supplies and services that can be described in sufficient detail to ensure complete understanding of the requirements by both parties and assessment of the inherent risks of performance.
[pic]
Other Fixed Fixed Price Contracts
[pic]
Within the fixed price contract group you can award contracts with: • economic price adjustment factors to allow for industries where costs fluctuate frequently either up or down • various incentive types which can be used to reward good performance or to impose provisions to deduct for poor performance • price redetermination provisions which permit issuing an order on a fixed price basis and allow for revisiting the reasonableless of that pricing later during the contract performance • a specified level of effort
[pic]
Cost Reimbursement Contracts
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A cost reimbursement contract allows for payment of all incurred costs, within a predetermined ceiling, that can be allocated to the contract, areallowable within cost standards, and reasonable. Therefore, all types of cost reimbursement contracts place the least cost and performance risk on the contractor.