Contract Types

Types of Contracts:

1. Fixed Price

• Firm Fixed Price contract
• Fixed Price Incentive Fee contract
• Fixed Price with Economic Price Adjustment

2. Cost Reimbursable

• Cost Plus Fixed Fee contracts
• Cost Plus Incentive Fee contracts
• Cost Plus Award Fee contracts

3. Time & Material

 

Fixed Price contract:
Under a fixed-price contract the contractor must deliver the product or perform the service for a pre-set firm fixed price or ceiling established in the contract. This contract type places upon the contractor maximum risk, full responsibility for all costs and resulting profit or loss, provides maximum incentive for the contractor to control costs and perform effectively, and imposes a minimum administrative burden upon the contracting parties. There are various types of fixed price contracts.
Variations of fixed price contracts:- Firm-Fixed-Price Contracts (FFP)- Fixed-Price Contracts with Economic Price Adjustments- Fixed-Price Incentive Contracts (FPI).

Cost reimbursement:
Under a cost-reimbursement contract, the contractor agrees to expend its best efforts to achieve the specified requirement, within the estimated amount established in the contract. If the contract is not fully performed at the time the contractor expends the funds, the contractor has no obligation for further performance, unless the contract is modified to increase the funds.
Variation of Cost reimbursement :- Cost-Plus-Incentive-Fee Contracts (CPIF)- Cost-Plus-Award-Fee Contracts (CPAF)- Cost-Plus-Fixed-Fee Contracts (CPFF)  

Time and material contracts:
Time and material contracts (also called time and means) are a hybrid type of contractual arrangement with aspects of both cost-reimbursable and fixed-price contracts. They are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed. 

Hybrid type because in a time & material (T&M) contract, both parties agree to unit rates. This is also the case in fixed-price arrangements. Like a cost-reimbursable arrangement, the time & material (T&M) contract has no definite end. The full value of the contract is not defined at the time the contract is awarded. Therefore, similar to cost-reimbursement contract, time and material (T&M) contract can grow in value over the period they are in effect.