FAR 14.104—Types of contracts.
Plain-English Summary
FAR 14.104 addresses the type of contract that must be used when an agency is buying through sealed bidding. Its core rule is that sealed bidding normally requires a firm-fixed-price contract, which gives bidders a clear, common pricing basis and supports fair competition. The section also recognizes a limited exception: a fixed-price contract with an economic price adjustment clause may be used when authorized under FAR 16.203, but only when price flexibility is necessary and feasible. A key fairness requirement is that any such clause must give all bidders an equal opportunity to compete on the same terms. In practice, this section matters because it ties the sealed-bidding method to a specific contract structure, limits discretion in choosing contract type, and helps prevent unequal pricing treatment among bidders.
Key Rules
Firm-fixed-price required
When an agency uses sealed bidding, the default and required contract type is firm-fixed-price. This means the contractor agrees to deliver the supplies or services for a set price, with the government bearing the risk of cost increases unless a permitted adjustment clause applies.
Limited exception for price adjustment
A fixed-price contract with an economic price adjustment clause may be used only if it is authorized under FAR 16.203. This exception is available when some flexibility in price is necessary and feasible, such as when market conditions may change during performance.
Equal opportunity for bidders
Any economic price adjustment clause used in sealed bidding must afford all bidders an equal opportunity to bid. The clause cannot be structured in a way that gives one bidder an unfair advantage or changes the competitive basis among bidders.
Consistency with sealed bidding
This section reinforces that the contract type must fit the sealed-bidding method. Contracting officers should not use sealed bidding to obtain a contract structure that is inconsistent with the fixed-price framework required here.
Responsibilities
Contracting Officer
Use firm-fixed-price contracts when conducting sealed bidding, unless a fixed-price contract with an economic price adjustment clause is properly authorized under FAR 16.203. Ensure any adjustment clause is necessary, feasible, and written so all bidders compete on equal terms.
Agency
Support the contracting officer in selecting a contract type that complies with sealed-bidding requirements and FAR 16.203. Ensure acquisition planning and solicitation terms preserve fair competition and do not create unequal pricing opportunities.
Bidders/Offerors
Prepare bids based on the contract type and pricing terms stated in the solicitation. Compete on the same basis as all other bidders and account for any authorized economic price adjustment clause in their pricing strategy.
Practical Implications
For day-to-day buying, this section means sealed bidding is usually a firm-fixed-price process, so the solicitation should clearly state a single price basis.
If market volatility is expected, contracting officers must confirm that an economic price adjustment clause is actually authorized and justified; it is not a routine add-on.
A common pitfall is drafting an adjustment clause that favors one bidder’s cost structure or creates unequal bidding conditions, which can undermine competition and lead to protest risk.
Another practical issue is failing to align the solicitation, evaluation method, and contract type; the pricing terms must be clear enough that all bidders can compete on the same footing.
Contractors should read sealed-bid solicitations carefully for any price adjustment terms, because those terms can materially affect risk, pricing, and post-award performance obligations.
Official Regulatory Text
Firm-fixed-price contracts shall be used when the method of contracting is sealed bidding, except that fixed-price contracts with economic price adjustment clauses may be used if authorized in accordance with 16.203 when some flexibility is necessary and feasible. Such clauses must afford all bidders an equal opportunity to bid.