Prime contracts (including letter contracts) other than firm-fixed-price contracts shall, by an appropriate clause, prohibit cost-plus-a-percentage-of-cost subcontracts (see clauses prescribed in subpart 44.2 for cost-reimbursement contracts and subparts 16.2 and 16.4 for fixed-price contracts). (c) The cost-plus-a-percentage-of-cost system of contracting shall not be used (see 10 U.S.C.2306(a) and 41 U.S.C.3905(a)). Contract types not described in this regulation shall not be used, except as a deviation under subpart 1.4. (b) Contracts negotiated under part 15 may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part (see 10 U.S.C.2306(a) and 41 U.S.C.3901). (a) Contracts resulting from sealed bidding shall be firm-fixed-price contracts or fixed-price contracts with economic price adjustment. In between are the various incentive contracts (see subpart 16.4), in which the contractor’s responsibility for the performance costs and the profit or fee incentives offered are tailored to the uncertainties involved in contract performance.
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The specific contract types range from firm-fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit (or loss), to cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee (profit) is fixed.
(b) The contract types are grouped into two broad categories: fixed-price contracts (see subpart 16.2) and cost-reimbursement contracts (see subpart 16.3). (2) The amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals. (1) The degree and timing of the responsibility assumed by the contractor for the costs of performance and (a) A wide selection of contract types is available to the Government and contractors in order to provide needed flexibility in acquiring the large variety and volume of supplies and services required by agencies.