Types of Contracts in Public Procurement

This section describes the types of contracts that can be used in acquisitions. It prescribes policies and procedures and provides guidance on selecting a type of contract that is appropriate for the circumstances of the acquisition. (1) The Customer shall insert clause 52.216-7, Recoverable Fees and Payment, in claims and contracts if a cost reimbursement contract or a time and material contract (other than a contract for a commercial purpose) is considered. If the contract is a time and material contract, clause 52.216-7 in conjunction with clause 52.232-7 applies, but only to the part of the contract that provides for the reimbursement of materials (as defined in clause at 52.232-7) at actual cost. In addition, clause 52.216-7 does not apply to hourly employment contracts. A cost-award fee contract is a reimbursement contract that provides for a fee consisting of (a) a basic amount (which may be zero) determined at the beginning of the contract and (b) an additional amount based on a government assessment and sufficient to establish excellent performance of the contract. Contracts with award fees plus awards are included in subsection 16.4, Incentive Contracts. See 16.401 (e) for a more detailed description and discussion of the application of these treaties. For restrictions, see 16.301-3 and 16.401(e)(5). (G) For the DoD, NASA, and the Coast Guard, the order fulfills one of the exceptions that allow for the use of competition other than full and open competition under 6,302 (10 U.S..C. 2304 c(b)(5)). The public interest exception may only be used if Congress is notified in accordance with 10 U.S.C.

2304(c)(7). Time and material contracts work well for budget-conscious buyers. If they closely monitor the costs of the project, this type of contract offers buyers a great opportunity to improve the skills of their team. However, a time and material project carries the risk of exploding the estimated cost if the project is not well managed. (a) Description. A fixed-price incentive contract is a fixed-price contract that provides for the adjustment of profit and the determination of the final contract price using a formula based on the ratio of the total final costs negotiated to the total target costs. The final price is subject to a price cap, which is negotiated at the beginning. The two forms of fixed-price incentive contracts, fixed objectives and successive objectives, are described in paragraphs 16 403-1 and 16 403-2 below. (c) The two basic categories of incentive contracts are fixed-price incentive contracts (see 16,403 and 16,404) and reimbursement premium contracts (see 16,405).

Since it is usually to the government`s advantage that the contractor assumes significant cost responsibility and a reasonable share of the cost risk, fixed-price incentive contracts are preferable if the contractual costs and performance requirements are sufficiently certain. Refund incentive contracts are subject to the general restrictions set out in section 16 301 that apply to all refund contracts. See 16.301 for requirements that apply to all reimbursement contracts to be used in conjunction with the following subsections. A fixed-price contract with a new retroactive pricing is appropriate for research and development contracts estimated at or below the simplified acquisition threshold, where it is established from the outset that a reasonable and reasonable fixed price cannot be negotiated and the amount and short duration of the service in question make it impracticable to use another type of fixed-price contract. (d) restrictions on the use of on-demand contracts for advisory and support services. (c) An assessment of the adequacy of State resources necessary for the proper planning, awarding and management of contracts other than fixed-term contracts; and (a) there are three types of contracts with open-ended deliveries: volume contracts, demand contracts and perpetual volume contracts. For the purchase of deliveries and/or services, the corresponding type of supply contract may be used if the exact times and/or quantities of future deliveries are not known at the time the order is placed. Pursuant to 10 U.S.C. 2304d, and 41 U.S.C. 4101, demand contracts and volume contracts are also referred to as supply order contracts or contract contracts. (h) See paragraph 10.001(d) for the insertion of the clause in paragraph 52.210-1, Market Research, if the contract is greater than $6 million for the purchase of items other than commercial items. There are a few subcategories of these three types of contracts, but we will limit ourselves to discussing the basic types.

We will not discuss subcategories in this article. Although companies have already done everything they need independently, this can be impractical and lead you to incur significant costs and develop a lower quality product, which is bad for your business. For this reason, your company must establish a purchasing management process to find the best suppliers and negotiate advantageous contracts that take into account the interests of both parties. Sellers can combine different types of contracts to create one that hits all the high marks of their trade exchange. Some business exchanges include a range of products and services such as work and equipment. In such cases, the contract must contain all applicable terms and agreements of more than one type of contract to cover all parts of the transaction, e.B. a fixed-price contract for the work and a cost-plus contract for the equipment. (a) the types of fixed-price contracts provide for a fixed price or, where appropriate, an adjustable price; Fixed-price contracts that provide for an adjustable price may include a maximum price, a target price (including target costs), or both. Unless otherwise specified in the contract, the maximum price or target price may only be adjusted on the basis of contractual clauses that provide for an appropriate adjustment or other modification of the contract price in the circumstances indicated. The principal shall use fixed prices or fixed prices with economic price adjustment agreements for the purchase of commercial goods, in so far as this is provided for in point (b) of 12 207. (a) Most incentive contracts contain only cost incentives, which take the form of a formula for adjusting profits or fees and are intended to motivate the contractor to manage costs effectively; No incentive contract can provide for other incentives without also offering an incentive (or restriction) of costs.

Since contracts come in many forms, each with its own purpose and purpose, it is important for business owners to understand the different types of contracts and choose the best one for each transaction. (4) For a proposed appointment of more than $75 million (or, for the Department of Defense, NASA and the Coast Guard, more than $100 million), the rationale must be approved by the procurement officer of the agency that made the appointment. This authority is not delegable, except in the case of the Under Secretary of State for Supply and Conservation, who acts as the procurement officer for the Ministry of Defense. 16,207 fixed-price and fixed-term contracts. (b) A fixed-price contract that best exploits the fundamental profit motive of the enterprise shall be applied if the risk involved is minimal or can be predicted with an acceptable level of certainty. However, where there is no adequate basis for setting prices, other types of contracts should be considered and negotiations should focus on the choice of a type of contract (or a combination of types) that appropriately links profit to the contractor`s performance. FFP contracts provide certainty about the contract to both the contractor and the contract agent. Both parties are confident that various aspects of the contract will not change. The duration of the contract, the cost of the goods or services and the value of the goods or services are not affected. Under the FFP, both parties have a better understanding and control over their own expenses, which allows the project to stay on budget. The Procurement Manager is responsible for analyzing the scope of the project to determine if it can be completed with internal resources or if external suppliers need to be hired.

Needs that need to be outsourced are subject to the formal procurement process. For example, a telecommunications company may outsource billing to a print service provider who can create these forms and send them to subscribers. (7) Orders under supply contracts of indefinite duration must contain the following information: 16 600 scope. Temporary and material contracts and hourly employment contracts are not fixed-price contracts. 16,601 temporary and material contracts. (a) Definitions for temporary and physical contracts. Direct materials are materials that go directly into the final product or that are used or consumed directly in connection with the supply of the final product or service. Hourly rate means the tariff(s) prescribed in the contract for the payment of workers that meets the qualifications of the category of work of a category of work specified in the contract, which – (1) are provided by the contractor; (2) carried out by subcontractors; or (3) Transferred between departments, subsidiaries or affiliates of the Contractor under joint control. . . .