Is there a hybrid vehicle that would better accommodate this service requirement? I've looked into the T&M contract and the required oversite can not be done due to personnel shortages. Hopefully this is enough information.
The following response is based solely on the question and background information provided. As we do not have all of the facts particular to your contract, program, and situation, we highly recommend you consult your Contracting Officer and Legal Office for guidance.
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While the FAR includes many contract types for consideration, your concern about lack of government personnel for proper contractor oversight raises a limiting factor in being able to effectively use some of them.
One thought is that your organization is not alone in experiencing this challenge. So my first suggestion would be to contact other activities your organization who may be aware of going through similar circumstances and asking how they are approaching the situation. Find out not only what they have done but also how effective has it been? Acquisition is a team sport and none of us should feel we are out there doing this on our own.
If talking to other organizations does not get you the desired result, you'll need to delve further into the FAR. In addition to your oversight concern for the T&M contract type, it is the least preferred and may only be used if the contracting officer determines that no other contract type is suitable (See FAR 16.601(d)(1)).
Since this is a service contract, the preference is performance-based (see FAR 37.102(a)). Performance-based contracting means structuring all aspects of an acquisition around the purpose of the work to be performed as opposed to either the manner by which the work is to be performed or broad and imprecise statements of work (se FAR 37.101). Public law 106-398, section 821(a) directs the following order of precedence for service contracts (See FAR 37.102(a)(2)):
(i) A firm-fixed price performance-based contract or task order.
(ii) A performance-based contract or task order that is not firm-fixed price.
(iii) A contract or task order that is not performance-based.
So, by law, you should first see if your situation lends itself to a firm-fixed performance-based contract or task order. If not, then a performance-based contract or task order that is not firm-fixed price. Only if you have a good reason would you use a contract or task order that is not performance-based. Now, the term task order means that you would have a contract for services that does not procure or specify a firm quantity of services and that provides for the issuance of orders for the performance of tasks during the period of the contract (see FAR 16.501-1).
I cannot tell by the information provided in your question if some sort of indefinite delivery contract vehicle would make sense in your situation. Assuming it would not, I would recommend a firm-fixed price performance-based contract. If the requirement is too fluid for the contractor to reasonably price on a firm-fixed price basis, then you are looking at possibly a combination of firm-fixed price and some other contract type that adequately shares the risk between the parties (a hybrid), or some other contract type altogether. The FAR does not preclude you from using multiple contract types on the same contract vehicle.
In a performance-based environment, we emphasize as much dialogue with industry as possible. Therefore, my recommendation is to talk to industry, providing what information you can about your constantly changing requirement, and get their input on what contract type(s) they feel would best work, keeping in mind you still need to have a performance-based requirement if at all possible. Bear in mind, some contract types require more administrative effort than others (for both the government and the contractor). Also, cost reimbursement contracts and some fixed price contract types require the contractor to have an adequate accounting system in place.