Contract Selection

1-2 Activity: Contract Selection
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1-2 Activity: Contract Selection
Contracting and procurement procedures demand that the United States government and procurement officers strictly work under the Federal Acquisition Regulations (FARs). Since April 1, 1984, FAR has been the primary regulation adopted by the executive agencies to acquire supplies and services with appropriated funds (acquisition.gov, 2019). While there are different types of contracts such as cost, cost plus fixed fee (CPFF), time and material (TM), labor-hour (LH), and indefinite-delivery (ID) contracts, the two basic types of contracts include fixed-price (FP) and cost-reimbursement (CR) contracts. All the contract types are available to contractors and government agencies to facilitate flexibility when acquiring large volumes or varieties of supplies and services that might be needed by agencies. Nevertheless, these types of contracts differ based on the timing and degree of risks assumed and the nature and amount of profit incentives given to the contractor (CDC, 2021). FAR requires procurement officers and U.S. government agencies to understand these forms of contracts and the factors to consider before selecting a given type of contract.
Cost contracts are subtypes of cost-reimbursement contracts (CRC) and serve to reimburse allowable cost up to a defined total amount awarded for the contract in which no profit or fee is paid to the contractor. This contract is used for purposes of R&D, often with nonprofit organizations and institutions. CPFF contract is also part of CRC that provide payments to contractors for negotiated profits or fee, which are fixed at the start of the contract. This type of contract is similar to a cost contract, although the fixed fee might be adjusted based on the work done. Therefore, under the CRC, cost contracts and CPFF are recognized as specific types of contracts that procurement officers and government agencies can choose based on the scenarios and objectives...