FAR 16.1—Subpart 16.1

General.

FAR 16.101 explains the basic policy framework for choosing among contract types in federal procurement. It covers the availability of a wide range of contract types, the two main factors that distinguish them—how much cost responsibility the contractor assumes and what profit or fee incentive is built in—and the two broad categories of contracts: fixed-price contracts and cost-reimbursement contracts. It also identifies incentive contracts as the middle ground, where the allocation of cost risk and the incentive structure are tailored to the uncertainties of the work. In practice, this section matters because contract type drives risk allocation, pricing behavior, contractor motivation, and the Government’s exposure to cost growth or savings. It is the starting point for understanding why a contracting officer selects one structure over another and why contractors must evaluate not just the price, but also the risk and reward mechanics of the deal.

Policies.

FAR 16.102 sets the basic policy rules for choosing and using contract types in federal procurement. It covers four main topics: the contract types allowed under sealed bidding, the flexibility allowed for negotiated procurements under FAR part 15, the prohibition on cost-plus-a-percentage-of-cost contracting, and the requirement that any needed determinations and findings (D&Fs) be completed before award. In practice, this section tells contracting officers which contract structures are permissible, limits the government’s ability to use nonstandard contract types, and reinforces that contract type decisions must be made within the boundaries of the FAR and applicable statutes. It also protects the Government from incentive structures that can encourage higher costs rather than better performance. For contractors, this section matters because it affects pricing risk, allowable subcontracting arrangements, and whether an award can legally proceed.

Negotiating contract type.

FAR 16.103 explains how contracting officers should choose and justify a contract type during negotiation. It covers the relationship between contract type and price negotiation, when firm-fixed-price is preferred, when other contract types may be appropriate, how changing circumstances can justify moving to a different contract type over time, and what documentation must be placed in the contract file or acquisition plan. It also requires the Government to explain why the selected contract type is necessary, what additional risks it creates, how those risks will be identified and managed, what resources are needed to administer it, and—when using other than firm-fixed-price—why that choice is appropriate and how the agency will transition toward firm-fixed-price in the future where practicable. The section matters because contract type directly affects risk allocation, pricing incentives, administrative burden, and the Government’s ability to control cost and performance. In practice, it pushes acquisition teams to make a deliberate, supportable choice rather than defaulting to a familiar contract type. It also creates a paper trail that should show the reasoning behind the decision and the plan for managing the resulting risks.

Factors in selecting contract types.

FAR 16.104 explains the factors a contracting officer should weigh when choosing and negotiating a contract type. It covers price competition, price analysis, cost analysis, the type and complexity of the requirement, combining contract types, urgency, period of performance or production run length, the contractor’s technical capability and financial responsibility, adequacy of the contractor’s accounting system, concurrent contracts, the extent and nature of subcontracting, and acquisition history. The purpose of the section is to help the Government match the contract type to the level of risk, pricing certainty, and performance uncertainty in the acquisition. In practice, this means the contracting officer should not default to a contract type without analyzing how well the requirement can be priced, how much risk should remain with the Government versus the contractor, and whether the contractor can support the proposed pricing arrangement. The section is especially important because it ties contract type selection to the quality of available pricing information and the realities of performance risk. It also encourages mixed contract structures when a single contract type is not appropriate for the entire requirement.

Solicitation provision.

FAR 16.105 tells contracting officers when they must include the solicitation provision at 52.216-1, Type of Contract, and when they may omit it. The section is narrow but important: it governs disclosure of the contract type in solicitations so offerors know whether the Government intends to use a fixed-price, cost-reimbursement, time-and-materials, labor-hour, or other authorized contract structure. In practice, this provision helps bidders understand the pricing, risk allocation, and administration framework before they submit offers. The rule also recognizes two exceptions where the provision is not required: fixed-price acquisitions conducted under simplified acquisition procedures and solicitations issued only for information or planning purposes. For contracting officers, this section is a basic solicitation-preparation requirement that supports transparency and reduces confusion about the contemplated contract vehicle.