[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR16.103]



[Page 303-304]

 

            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. 16.103  Negotiating contract type.



    (a) Selecting the contract type is generally a matter for 

negotiation and requires the exercise of sound judgment. Negotiating the 

contract type and negotiating prices are closely related and should be 

considered together. The objective is to negotiate a contract type and 

price (or estimated cost and fee) that will result in reasonable 

contractor risk and provide the contractor with the greatest incentive 

for efficient and economical performance.

    (b) A firm-fixed-price contract, which best utilizes the basic 

profit motive of business enterprise, shall be used when the risk 

involved is minimal or can be predicted with an acceptable degree of 

certainty. However, when a reasonable basis for firm pricing does not 

exist, other contract types should be considered, and negotiations 

should be directed toward selecting a contract type (or combination of 

types) that will appropriately tie profit to contractor performance.

    (c) In the course of an acquisition program, a series of contracts, 

or a single long-term contract, changing circumstances may make a 

different contract type appropriate in later periods than that used at 

the outset. In particular, contracting officers should avoid protracted 

use of a cost-reimbursement or time-and-materials contract after 

experience provides a basis for firmer pricing.

    (d) Each contract file shall include documentation to show why the 

particular contract type was selected. Exceptions to this requirement 

are:

    (1) Fixed-price acquisitions made under simplified acquisition 

procedures,



[[Page 304]]



    (2) Contracts on a firm fixed-price basis other than those for major 

systems or research and development, and

    (3) Awards on the set-aside portion of sealed bid partial set-asides 

for small business.



[48 FR 42219, Sept. 19, 1983, as amended at 50 FR 1742, Jan. 11, 1985; 

50 FR 52429, Dec. 23, 1985; 54 FR 5054, Jan. 31, 1989; 60 FR 34756, July 

3, 1995; 60 FR 48260, Sept. 18, 1995; 61 FR 39198, July 26, 1996]