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  • Question

    Where can I find a softcopy of the old AFIT wall chart: "Types of Contracts: A Comparison & Summary"? The hardcopy that I have is dated 01 Jan 1988. Thanks


    Answer

    Contract Types
       
    FIXED-PRICE FAMILY
       
    FIRM
    FIXED-PRICE
    (FFP)
    FIXED-PRICE
    WITH ECONOMIC
    PRICE ADJUSTMENT
    (FP-EPA)
     
    FIXED-PRICE
    INCENTIVE
    (FPI)
     
    PRICE
    REDETERMINATION
     
     
     
     
     
     
     
     
    Government pays price which is not subject to any adjustment
     regardless of
     contractor’s cost experience.
     
    Place maximum risk on con-tractor.
     
    Contractor has greatest incentive to control costs.
     
    Minimum administrative bur-den on parties.
     
    Preferred contract type.
     
    Level of Effort:  Payment is based on effort expended rather than results achieved.  Contractor provides specified effort over a stated period for fixed price.
    The price paid by the
     government may be revised upward or downward if certain contingencies exist.
     
    Provides for price adjustment to protect parties against significant economic fluctuation or changes in contractor’s established prices.
     
    EPA provisions can be based on established (published) prices, actual costs, or cost index.
     
    Adjustments based on established prices restricted to Industry-wide contingencies.
     
    Adjustment based on labor or material costs limited to contingencies beyond the contractor’s control.
    Firm Target:
      Government pays price that is the sum of final negotiated cost and final profit. Final profit determined by comparing final negotiated
    cost to target cost and
    adjusting target profit IAW formula (share-ratio).  Final price cannot exceed ceiling price.
     
    Successive Targets:
    At predetermined production point, firm target cost is negotiated and firm target profit is determined IAW adjustment formula; either an FFP or FPI(F) can be negotiated.
    Prospective:  Government pays fixed price for goods or services for a given period, but price is subject to revision at stated times during performance of contract.
     
    Retroactive:  Government pays price (subject to ceiling), that is negotiated after contract performance.
     
     
     
    Price
     
    Price
    EPA Clause
    Firm Target:
    Target Cost
    Target Profit
    Ceiling Price
    Sharing Formula
     
    Successive Targets:
    Initial Target Cost
    Initial Target Profit
    Ceiling Price
    Target Profit Adjustment
      Formula
    Prospective:
    Price
    Ceiling (Optional)
     
    Retroactive:
    Ceiling Price
     
     

     
    When fair and
     reasonable prices can be established at outset.
     
    Particularly suitable for standard or modified commercial items or military items for which sound prices can be developed.
     
    Level of effort:  R&D investigation or study.
    When contingencies resulting from unstable market or labor conditions can be identified and covered by a separate price adjustment clause. Where assumption of a degree of cost responsibility by con-tractors will provide incentive for effective cost control.
     
    Can combine with incentives on performance and schedule.
    Prospective:  Quantity production or services when a fair and reasonable price can be negotiated for initial period but not entire contract period.
     
    Retroactive:  When fair and reasonable FFP cannot be negotiated and low value or short period of performance renders other types impracticable.
     
     
     
    Level of effort:  Used only when work cannot be clearly defined but effort desired can be agreed upon.
       
    Sole purpose cannot be to shift cost responsibility to government; requires simultaneous agreement on all elements of pricing structure.
     
    Prospective: FFP not feasible; pricing periods conform to
    contractor’s
    accounting system; assurance that price predetermina-
    tion will be taken promptly.
     
    Retroactive:Reasonable assurance that price
     redetermination will be taken promptly; requires HCA
    approval
       
     
    Not for use with sealed bid method
    Adequate Contractor Cost Accounting System







    Contract Types
     
       
    COST-REIMBURSEMENT FAMILY
      COST-PLUS-
    INCENTIVE-FEE
    (CPIF)
    COST-PLUS
    AWARD-FEE
    (CPAF)
    COST-PLUS-
    FIXED-FEE
    (CPFF)
    COST
    AND COST
    SHARING
     
     
     
     
     
     
     
    Government pays allowable cost and incentive fee.
     
    Incentive fee determined by comparing actual cost to target cost and adjusting target fee IAW fee adjustment formula (share ratio).
     
    Performance incentives should be incorporated if development is feasible and government performance objectives have been determined.
     
    Government pays allowable cost, base fee, and award fee.
     
    Contractor earns a base fee which does not vary with performance and all or part of an award fee based on subjective evaluation by government of contractor’s performance.
     
    The determination and methodology for determining the award fee are unilateral decisions make solely at the discretion of the government. The contractor may invoke the Disputes Clause though if he feels the government did not follow the award fee criteria set forth in the contract.
     
    Evaluation of performance and corresponding partial payment of fee made at stated intervals.
     
    Government pays allowable cost and fixed fee.
     
    Fixed fee does not vary with actual costs.
     
    Fixed fee may be adjusted for changes in work to be performed.
     
    Minimum incentive for contractors to control costs.
     
    Completion Form:  Requires contractor to deliver end product (preferred form).
     
    Term Form:  Requires specified level of effort over stated period of time.
     
    Cost:  Government pays allowable cost, no fee.
     
    Cost Sharing: Government pays only a portion of allowable cost as agreed to by both parties. Contractor absorbs portion of the cost with expectation of gaining other benefits from the effort.

     
    Target Cost
    Target Fee
    Sharing Formula
    Minimum Fee
    Maximum Fee
     
     
    Estimated Cost
    Base Fee
    Award Fee
     
    Estimated Cost
    Fixed Fee
     
    Estimated Cost
     
     

     
     
    Development and test where a profit incentive is likely to provide motivation for more effective management.
     
    Level of effort (R&D or Production)
     
    Method of proving fee which motivates excellence in such areas as quality, timelines, technical ingenuity, and cost-effective management.
     
    Award fee may be used in conjunction with other types of contracts.
     
    Research
     
    Preliminary exploration or study.
     
    Development and test where CPIF not practical.
     
    Cost:  Non-profit institutions/ organizations and facilities contracts.
     
    Cost Sharing:  R&D efforts with either profit or non-profit contractors.
     
     
     
     
     
    Adjustment in fee is limited by minimum and maximum fees negotiated.
     
     
    Base Fee shall not exceed 3 percent of estimated cost.
     
    Weighted guidelines (for determining profit objective) shall not be applied.
     
    Shall not be used in lieu of CPFF or CPIF when objective measurement is feasible.
     
    Fee shall not exceed 15 percent of estimated cost for R&D or 10 percent of estimated cost for other
     contracts.
     
    Price of A/E contract shall not exceed 6 percent of estimated cost of the public work or utility project.
     
    Cost Sharing:  Not applicable for effort specified by government or that has only minor relevance to commercial activities of the contractor.
       
    Not for use with sealed bid method
    Adequate Contractor Cost Accounting System
     
    Not for use with sealed bid method
    Adequate Contractor Cost Accounting System







    Contract Types
     
      OTHER TYPES
    SPECIAL USES
     
      Time and
    Materials
    Labor Hours
    Letter
    CONTRACT
    INDEFINITE
    DELIVERY
     
     
     
     
     
     
     
     
     
    Government pays fixed hourly rate for supplies or services.
    With contractor furnished material. Provided at cost.
     
    Labor Hours differs only in that no material is supplied by contractor.
     
    Preliminary contractual instrument that authorizes immediate commencement of effort.  (Type of undefinitized contract action (UCA))
     
    Method of payment corresponds to type of contract contemplated when definitized
     
    Definite Quantity:
    Provides for definite quantity of specified supplies or services for a fixed period with deliveries at designated locations upon order
     
    Requirements:  Provides for furnishing all actual requirements of specified supplies or services during a specified period as ordered by designated activities
     
    Indefinite Quantity:  Provides for furnishing indefinite quantifies of specified supplies or services during a specified time but government must order a stated minimum quantity.
     
     
     

     
    Hourly labor rate
    Ceiling Price
     
     
     
     
    Firm Fixed Price, Fixed Price with EPA, or Price Redetermination
     
     
     
     

     
     
    Engineering and design services, repair, maintenance, or overhaul, emergency situations
     
    When interests of national defense demand that work commence immediately and insufficient time available to negotiate a definitive contract
    Definite Quantity:  Where definite quantity of supplies or services required during a specified period are readily available
     
    Requirements:  When impossible to determine in advance the precise quantities needed during a definite period of time
     
    Indefinite Quantity:  Same as requirements but government is only committed to minimum quantity
     
     
     
     
     
     
     
     
    Determination that no other type of contract is suitable
     
    Written determination that no other type suitable
     
    Price ceiling required if award based on price competition
     
    Must be defined within 180 days or prior to completion of 40% of work
     
    Maximum government liability cannot exceed 50% of estimated cost at outset
     
     
       
    .
       
    Not for use with sealed bid method
     
     
    Not for use with sealed bid method
     
     






     
     
     

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