[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR16.104]

[Page 293-294]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 16_TYPES OF CONTRACTS--Table of Contents
 
                  Subpart 16.1_Selecting Contract Types
 
Sec.  16.104  Factors in selecting contract types.

    There are many factors that the contracting officer should consider 
in selecting and negotiating the contract type. They include the 
following:
    (a) Price competition. Normally, effective price competition results 
in realistic pricing, and a fixed-price contract is ordinarily in the 
Government's interest.
    (b) Price analysis. Price analysis with or without competition, may 
provide a basis for selecting the contract type. The degree to which 
price analysis can provide a realistic pricing standard should be 
carefully considered. (See 15.404-1(b).)
    (c) Cost analysis. In the absence of effective price competition and 
if price analysis is not sufficient, the cost estimates of the offeror 
and the Government provide the bases for negotiating contract pricing 
arrangements. It is essential that the uncertainties involved in 
performance and their possible impact upon costs be identified and 
evaluated, so that a contract type that places a reasonable degree of 
cost responsibility upon the contractor can be negotiated.
    (d) Type and complexity of the requirement. Complex requirements, 
particularly those unique to the Government, usually result in greater 
risk assumption by the Government. This is especially true for complex 
research and development contracts, when performance uncertainties or 
the likelihood of changes makes it difficult to estimate

[[Page 294]]

performance costs in advance. As a requirement recurs or as quantity 
production begins, the cost risk should shift to the contractor, and a 
fixed-price contract should be considered.
    (e) Urgency of the requirement. If urgency is a primary factor, the 
Government may choose to assume a greater proportion of risk or it may 
offer incentives to ensure timely contract performance.
    (f) Period of performance or length of production run. In times of 
economic uncertainty, contracts extending over a relatively long period 
may require economic price adjustment terms.
    (g) Contractor's technical capability and financial responsibility.
    (h) Adequacy of the contractor's accounting system. Before agreeing 
on a contract type other than firm-fixed-price, the contracting officer 
shall ensure that the contractor's accounting system will permit timely 
development of all necessary cost data in the form required by the 
proposed contract type. This factor may be critical when the contract 
type requires price revision while performance is in progress, or when a 
cost-reimbursement contract is being considered and all current or past 
experience with the contractor has been on a fixed-price basis.
    (i) Concurrent contracts. If performance under the proposed contract 
involves concurrent operations under other contracts, the impact of 
those contracts, including their pricing arrangements, should be 
considered.
    (j) Extent and nature of proposed subcontracting. If the contractor 
proposes extensive subcontracting, a contract type reflecting the actual 
risks to the prime contractor should be selected.
    (k) Acquisition history. Contractor risk usually decreases as the 
requirement is repetitively acquired. Also, product descriptions or 
descriptions of services to be performed can be defined more clearly.

[48 FR 42219, Sept. 19, 1983, as amended at 50 FR 1742, Jan. 11, 1985; 
50 FR 52429, Dec. 23, 1985; 62 FR 44814, Aug. 22, 1997; 62 FR 51270, 
Sept. 30, 1997]