[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: 48CFR16.104]



[Page 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. 16.104  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 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]