Contract Types

Contracts with federal and state governments usually fall within these categories:

- Indefinite Delivery/Indefinite Quantity (IDIQ)

- Fixed Price

- Cost Plus/Cost Reimbursement

Indefinite Delivery/Indefinite quantity (IDIQ)

This is a type of contract is for an indefinite quantity of supplies or services to be provided during a fixed period of time.

Awards are usually for base years as well as option years.

The Government uses an IDIQ contract when it cannot predetermine, above a specified minimum, the precise quantities of supplies or services that will be require during the contract period.

For this type of contract negotiations are usually  only made with the selected company (or companies). 

This type of contract is exempt from protest, per Federal Acquisition Regulation’s Subpart 33.

Fixed Price

With this type of contract the contractor is paid a negotiated amount regardless of any incurred expenses.

Cost Plus/Cost Plus Reimbursement

A cost-plus contract is also called a Cost Reimbursement Contract.  It is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit.

There are four variations of this type of contract.

- Cost Plus Fixed Fee (CPFF):  the negotiated fee remains the same.  It does not changed unless the scope of the contract changes.

- Cost-Plus-Incentive Fee (CPIF):   contractors get a bigger award at the end of the contract for keeping cost low.  The lower they are able to keep cost the bigger their awards.

- Cost Plus Award Fee (CPAF):  contractors are paid based on their performance.  The metrics by which contractors are measured is stiuplated in the contract.   An awards fee board determines how much the contractor gets in awards at the end of the contract period.

- Cost Plus Percentage of Cost:  this pay a fee that rises as the contractor's cost rise. It provides no incentive for the contractor to control costs.  This method is prohibited by the FAR.