FAR 16.207-1—Description.
Plain-English Summary
FAR 16.207-1 describes the basic structure of a firm-fixed-price, level-of-effort term contract. This section covers two core features: first, the contractor must provide a specified level of effort for a stated period of time on work that can only be described in general terms; second, the Government pays a fixed dollar amount for that effort. In practice, this type of contract is used when the Government can define the required labor or effort more clearly than a precise end product or measurable result, but still wants price certainty. The section matters because it distinguishes this contract type from other fixed-price arrangements by focusing on effort expended rather than completion of a fully defined deliverable. For contracting officers, it helps frame when this contract type is appropriate and how it should be structured. For contractors, it clarifies that payment is tied to furnishing the agreed level of effort, not to achieving a specific outcome beyond that effort commitment.
Key Rules
Specified level of effort
The contractor must commit to a defined amount of effort, usually expressed in labor hours, staffing, or similar measures. The contract is built around providing that effort over the contract period rather than guaranteeing a particular end result.
Stated period of performance
The required effort must be provided over a specific time period. This makes the duration of performance an essential part of the contract structure and ties the effort obligation to that period.
Work stated generally
This contract type is used when the work can only be described in general terms. It is appropriate where the Government cannot precisely define the final product or outcome, but can define the level of effort needed.
Fixed dollar price
The Government pays a fixed dollar amount for the agreed effort. The price does not vary based on actual cost experience, so the contractor bears the risk of performing the required effort within the fixed price.
Responsibilities
Contracting Officer
Structure the contract so it clearly states the required level of effort, the period of performance, and the fixed price. Ensure the work is suitable for this contract type and that the terms make the effort requirement understandable and enforceable.
Contractor
Provide the specified level of effort during the stated period and manage performance within the fixed dollar amount. The contractor must staff and perform in a way that satisfies the effort commitment even though the work is described only generally.
Government/Agency
Define the need in terms of effort rather than a fully detailed deliverable and accept the fixed-price structure for that effort. The agency must monitor whether the contractor is providing the agreed level of effort during the performance period.
Practical Implications
This contract type is useful when the Government needs labor or support services but cannot precisely define the final output in advance.
A common pitfall is confusing level-of-effort contracts with performance-based fixed-price contracts; here, the key obligation is effort, not a specific completed result.
Contract language should be very clear about how effort will be measured, because disputes often arise over whether the contractor actually provided the required level of effort.
Contractors should track staffing and hours carefully to avoid underperformance, since payment is fixed even if actual costs are higher than expected.
Contracting officers should use this type only when the requirement truly cannot be stated in more precise terms, because vague requirements can create administration and enforcement problems.
Official Regulatory Text
A firm-fixed-price, level-of-effort term contract requires- (a) The contractor to provide a specified level of effort, over a stated period of time, on work that can be stated only in general terms; and (b) The Government to pay the contractor a fixed dollar amount.