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  • Question

    Can I put both development work and production work on the same contract?


    Answer

    Yes, you may put both development work and production work on the same contract.
    You must ensure that you have the authority for both efforts such as a Justification and Approval if the resultant contract will be awarded on a sole source basis. The Federal Acquisition Regulation (FAR) anticipates not only placing disparate efforts on a single contract but the possible need for different types of contracts on the same document.

    Specifically, FAR 16.102(b) states (in part):
    "(b) Contracts negotiated under Part 15 may be of any type or combination of types that will promote the Government’s interest…"

    Additionally, FAR 16.103(b) (in part) reiterates this concept, as follows:
    "…negotiations should be directed toward selecting a contract type (or combination of types) that will appropriately tie profit to contractor performance."

    However, note that the FAR also suggests at FAR 16.104(d):
    "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."

    This suggests that you might consider different types of contracts for R&D efforts versus production efforts. Combining these types of efforts on a single contract document may be beneficial for contract administration, such as establishing future production options after development has been completed. However, be careful when combining contract types from different families such as cost reimbursement and fixed price on the same contract as this will complicate the writing of the contract document. You must ensure that the proper clauses for each contract type are included and that the cost accounting for each is segregated to avoid mischarging by the contractor.

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