FAR Companion Change
| Date Detected | 2026-03-11 09:24 UTC |
| Type | COMPANION_MODIFIED |
| Entity | PART_16 |
Summary
PART_16 updated: 121 lines added, 289 lines removed
Diff
--- previous +++ current @@ -1,296 +1,124 @@ -Part 16 - Types of Contracts -FC 16.101(a) Selecting contract type. -A wide selection of contract types is available to the government and contractors in order to -provide flexibility in acquiring the large variety and volume of supplies and services required by -agencies. Contract types vary according to the degree and timing of the responsibility assumed -by the contractor for the costs of performance; and the amount and nature of the profit incentive -offered to the contractor for achieving or exceeding specified standards or goals. -Contract types are grouped into two broad categories: fixed-price contracts (see subpart 16.2) -and cost-reimbursement contracts (see subpart 16.3). The continuum of contract types range -from firm-fixed-price, in which the contractor has full responsibility for the performance costs, to -cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs. -In between are various incentive contracts (see subpart 16.4), in which the contractor’s -40 +part 16 streamlining. +The PTAI provides targeted support for streamlining FAR part 16 ordering procedures by +offering proven innovative approaches that agencies can adopt and adapt to their +procurements. The use of PTAI and other innovative approaches directly support FAR part 16 +core objectives of reducing time, complexity, and cost while maintaining acquisition integrity and +achieving optimal mission outcomes. Five procedures that a contracting officer can use specific +to the ordering process are highlighted below. See the Periodic Table of Acquisition Innovation +(PTAI) for additional information and additional approaches. +● Phased down-select processes. Consider phased evaluation processes and down- +select approaches that progressively narrow the competitive field through increasingly +detailed assessments. Initial phases might evaluate high-level solution approaches and +47 Federal Acquisition Regulation (FAR) Companion -responsibility for the performance costs and the profit or fee incentives offered are tailored to the -uncertainties involved in contract performance. -In line with 1.102, Guiding principles for the System, agencies are encouraged to use innovative -contracting types and approaches to the maximum extent practicable to (1) achieve mission -outcomes; (2) promote efficiency and economy in contracting; (3) avoid unnecessary burdens -for agencies and contractors; and (4) align with commercial practices. -The objective is to select a contract type and pricing structure (or estimated cost and fee) that -are most appropriate to the circumstances of the acquisition. Factors to consider may include -reasonable contractor risk and providing the contractor with incentives for efficient, cost- -effective, and quality performance. -FC 16.2 Firm-Fixed-Unit-Price (FFUP) contract. -A firm-fixed-unit-price (FFUP) contract establishes a fixed-price(s) for supplies or services but -does not establish the quantity, except for a guaranteed minimum and a ceiling. Volume -discounts and equitable adjustments to the unit price based on actual usage do not render the -contract other than a firm-fixed-unit-price contract. -A FFUP contract is suitable when the government needs supplies or services but is unsure of -the exact quantity. The contract specifies units of supply or service, estimated quantities, and -unit prices, and may include a clause for price adjustment based on actual usage (e.g., volume -discount or other economies of scale). -FFUP contracts should require identifiable, discrete, and common units of service, each -representing a consistent measure of value and work output. The unit price covers all costs and -contractor profit, serving as total compensation for unit delivery. The contractor assumes cost -risk, except for pre-stipulated price adjustment. -When establishing a FFUP contract, ensure the following: -1. Payment is for supplies or services rendered, not just for labor expended and materials -acquired regardless of achievement. Each unit delivered and accepted provides a -measure of value to the government commensurate with the unit price. -2. Payment is for acceptable performance, not just best effort. The government pays only -for supplies or services that conform to contract requirements. -3. The unit price covers all costs and profit, not just labor, and the contractor bears the risk -associated with all performance costs (e.g, labor and materials). The government bears -the cost risk associated with the quantity of services needed. -4. Fiscal controls (e.g., limitation of funds clause), as needed, are specified in the contract -to avoid open-ended obligations. -FC 16.2 Consumption-based contracting. -A firm-fixed-unit-price (FFUP) contract may be structured on a consumption basis, in which a -fixed-price is established for a unit of usage, such as a resource unit, and supplies and services -are metered and billed based on actual usage over a predetermined periodic basis. A type of -FFUP contract is a consumption-based contract. -41 +team qualifications, while later phases examine technical details, pricing, and +implementation plans from down-selected quoters/offerors. This approach reduces the +bid preparation burden for industry while allowing agencies to focus evaluation +resources on the most promising solutions. +● Exchanges with the best suited quoter/offeror. Consider stating in the order +solicitation, and then utilizing as advantageous to the government: +○ Once the government determines the quotation/proposal that is most +advantageous to the government based on its evaluation of initial responses, the +government may communicate with only that best suited quoter/offeror to +address any remaining issues consistent with the terms of the solicitation. These +issues may include technical and/or price. If the parties cannot successfully +negotiate any remaining issues, as determined relevant by the government, the +government reserves the right to communicate with the next best suited +quoter/offeror based on the original analysis consistent with the terms of the +solicitation. +● Comparative evaluation. The government may perform a comparative evaluation to +select the quotation/proposal that provides the best value by comparing responses +against the evaluation factors in the solicitation. +○ Rather than assigning ratings to each quoter/offeror, the evaluation team ranks +quotations/proposals against each other or, if sufficient, identifies the top ranked +quotation/proposal for each evaluation factor. +○ This streamlined approach focuses on documenting the rationale for how +quotations/proposals rank relative to one another and explaining why the +selected quotation/proposal represents the best value to the government. The +evaluation and documentation should be efficient and proportional to the +acquisition's complexity and value. +● Confidence ratings. A type of adjectival rating system that permits evaluators to look +holistically at the strong points and weak points of a proposal and then assign a +confidence rating based on the evaluators’ overall confidence in the offeror’s likelihood +of success. +○ Confidence ratings can be used for any evaluation except for sealed bidding (part +14). +○ The confidence rating scale is designed to communicate the government’s level +of confidence that a proposal will successfully meet solicitation requirements. It +generally incorporates risk assessment, as that is often a natural aspect in +determining the level of confidence the government has that a proposal will +successfully meet requirements outlined in a solicitation. +○ Best practices and use cases for the application of confidence ratings can be +found at the Periodic Table of Acquisition Innovations (PTAI). +48 Federal Acquisition Regulation (FAR) Companion -This contract type may be suitable for procuring cloud computing or other types of information -technology where the supply or service can be described in terms of usage rather than a -specific product or task, ongoing and dynamic usage makes separate task or delivery orders -impractical, and anticipated usage cannot be estimated to the level of certainty that would justify -a firm-fixed-price contract. -The contracting officer should establish a price for all estimated requirements. The contracting -officer should also state a realistic estimate of the consumption and the total amount in dollars -estimated to be expended in the contract. The contracting officer may obtain the estimate from -records of previous requirements and consumption, or by other means, and should base the -estimate on the most current information available. Although a consumption-based firm-fixed- -price contract is not subject to subpart 16.5, to establish a binding contract the contract must -provide for a guaranteed minimum amount of usage that is more than a nominal amount, but not -more than the government is likely to use. -The contracting officer should determine that the consumption monitoring capabilities offered by -the Contractor will enable the government to adequately track actual usage before awarding a -contract. -The contracting officer should ensure that the contract provides appropriate fiscal controls, -ensuring that the government will not be obligated to pay the Contractor any amount in excess -of the amount of obligated funding identified in the contract, and the Contractor would not be -obligated to continue performance if doing so would exceed this amount. As an example, -language similar to the below could be incorporated into the solicitation and resultant contract: -The Contractor shall— -1. Provide, at no additional cost to the government, access to tools that enable the -government to track its usage of services offered on a consumption basis; and -2. Notify the contracting officer when total consumption reaches— -a. 50 percent and 75 percent of the ceiling price for each CLIN for consumption- -based services, or other milestones as agreed upon by the Contractor and the -contracting officer; and -b. 50 percent and 75 percent of the contract ceiling price, or other milestones as -agreed upon by the Contractor and the contracting officer. -In addition or in lieu of the language above, the contracting officer may use a limitation of funds -clause when CLINs under the contract are incrementally funded, such as or similar to FAR -52.232-22 Limitation of Funds, DFARS 252.232-7007, Limitation of Government's Obligation, or -NFS 1852.232-77, Limitation of Funds (Fixed-Price Contract). -FC 16.102 Factors in selecting contract types. -There are many factors that a contracting officer may consider in selecting the contract type. -They include, but are not limited to, the following: -1. Commerciality: When acquiring commercial products or services, the contract types -used should generally align with those prevalent in the commercial market. -42 +● On-the-spot consensus documentation. Evaluators collaboratively discuss and +immediately agree upon the merits and associated rating, as applicable, for a +quote/proposal against specific criteria. This approach involves a team of evaluators +reviewing a quote/proposal, engaging in a focused discussion to identify key +differentiators, and then arriving at a unified assessment and corresponding rating in +real-time. +○ The benefits of using on-the-spot consensus evaluation include increased +efficiency, as it streamlines the evaluation process by eliminating the need for +multiple rounds of individual reviews and consolidations. +○ It enhances transparency by creating a clear record of the evaluation team's +collective reasoning and the basis for their consensus decisions. +FC 16.507-2(c)(3) Blanket Purchase Agreements (BPAs) under multiple-award contracts. +The foundation of the contracting officer’s decision to establish one or more BPAs under a +multiple-award contract, when authorized, lies in thoroughly understanding the government’s +requirement. +Single award BPAs work particularly well when the government’s needs are highly integrated or +sequential, where one task naturally flows into or depends upon another. Single award BPAs +are also well-suited when standardization or scalability is critical (for instance, when there is a +need for consistent processes, systems, or methodologies across all orders). Consider the +value of relationship continuity; some requirements benefit significantly from a single vendor +developing deep institutional knowledge or rapid delivery capabilities over time. +Multiple award BPAs, conversely, are well-suited when requirements can be logically +segmented into distinct categories. Multiple BPAs provide access to varied approaches and +innovations, which can be particularly valuable for complex or evolving requirements. When +surge capacity or broad geographic coverage matters, multiple vendors can provide the +flexibility and redundancy your mission demands, especially if they are awarded based on +specialization areas or geographic regions. +Cost considerations extend beyond unit prices. While multiple awards may drive competition on +individual orders, they also increase administrative overhead. Weigh these administrative costs +against potential savings and consider the total cost of ownership, including any transition costs +if vendors change. For high-frequency, low-dollar orders, the simplicity of a single award often +provides the best value. For irregular, high-value requirements, the benefits of competition may +justify the additional administrative investment. +Performance risk represents another critical factor. Single awards create vendor dependency— +if your sole vendor falters, mission impact could be significant. Multiple awards provide natural +backup options and risk mitigation. However, this must be balanced against the complexity of +managing multiple relationships and ensuring consistency across vendors. +Market research will reveal whether meaningful competition exists. If the market offers diverse, +qualified sources with meaningfully different approaches or capabilities, multiple awards could +drive innovation and value. +49 Federal Acquisition Regulation (FAR) Companion -2. Price competition: Normally, effective price competition results in fair and reasonable -pricing, and a fixed-price contract is ordinarily in the government’s interest. -3. Price analysis: Price analysis, with or without competition, may provide a basis for -selecting the contract type. The degree to which price analysis can provide a realistic -pricing standard should be carefully considered (see 15.404-1(b)). -4. Cost analysis: In the absence of effective price competition and if price analysis is not -sufficient, the cost estimates of the offeror and the government may provide the bases -for negotiating contract pricing arrangements. It is essential that the uncertainties -involved in performance and their possible impact upon costs be identified and -evaluated, so that a contract type that places a reasonable degree of cost responsibility -upon the contractor can be negotiated. -5. Type and complexity of the requirement: Complex requirements, particularly those -unique to the government, may have a greater assumption of risk by the government. -This may be relevant to complex research and development contracts, as an example, -when performance uncertainties or the likelihood of changes makes it difficult to estimate -performance costs in advance. As a requirement recurs or as quantity production -begins, the cost risk should shift to the contractor, and a fixed-price contract should be -considered. -6. Combining contract types: If the entire contract cannot be firm-fixed-price, the -contracting officer may consider whether or not a portion of the contract can be -established on a firm-fixed-price basis. -7. Urgency of the requirement: If urgency is a primary factor, the government may choose -to assume a greater proportion of risk or it may offer incentives tailored to performance -outcomes to ensure timely contract performance. -8. Period of performance or length of production run: In times of economic uncertainty, -contracts extending over a relatively long period may require economic price adjustment -or price redetermination clauses. -9. Contractor’s technical capability and financial responsibility. -10. Adequacy of the contractor's accounting system. Before agreeing on a contract type -other than firm-fixed-price, the contracting officer should ensure that the contractor’s -accounting system will permit timely development of all necessary cost data in the form -required by the proposed contract type. This factor may be critical when the contract -type requires price revision while performance is in progress or when a cost- -reimbursement contract is being considered and all current or past experience with the -contractor has been on a fixed-price basis. See FAR 42.302(a)(12). -11. Concurrent contracts: If performance under the proposed contract involves concurrent -operations under other contracts, the impact of those contracts, including their pricing -arrangements, should be considered. -12. Extent and nature of proposed subcontracting: Select a contract type that reflects the -actual risks to the prime contractor if the contractor proposes extensive subcontracting. -13. Acquisition history: Contractor risk usually decreases as the requirement is repetitively -acquired. Also, product descriptions or descriptions of services to be performed can be -defined more clearly. -43 -Federal Acquisition Regulation (FAR) Companion -FC 16.202 Application of firm-fixed-price contracts. -This contract type places upon the contractor maximum risk and full responsibility for all costs -and resulting profit or loss. It provides maximum incentive for the contractor to control costs and -perform effectively and imposes a minimum administrative burden upon the contracting parties. -For firm-fixed-price contracts that include travel related expenses, the contracting officer may -include a separate reimbursable line item for travel, as travel is generally a reimbursable -expense under commercial practices. The contracting officer may use a firm-fixed-price contract -in conjunction with an award-fee incentive (see FAR 16.402-3) and performance or delivery -incentives (see FAR 16.403-2 and FAR 16.403-3) when the award fee or incentive is based -solely on factors other than cost. The contract type remains firm-fixed-price when used with -these incentives. -FC 16.204 Fixed-price contracts with prospective price redetermination ceiling price. -If the contract provides for a ceiling price based on evaluation of uncertainties involved in -performance and their possible cost impact, the ceiling price should provide for assumption of a -reasonable proportion of the risk by the contractor and, once established, may be adjusted only -by operation of contract clauses providing for equitable adjustment or other revision of the -contract price under stated circumstances. -FC 16.205 Fixed-ceiling-price contracts with retroactive price redetermination. -Since this contract type provides the contractor no cost control incentive except the ceiling price, -the contracting officer should make clear to the contractor during discussion before award that -the contractor’s management effectiveness and ingenuity will be considered in retroactively -redetermining the price. -FC 16.302 Cost contracts. -A cost contract may be appropriate for research and development work, particularly with -nonprofit educational institutions or other nonprofit organizations. -FC 16.303 Cost-sharing contracts. -A cost-sharing contract may be appropriate when the contractor agrees to absorb a portion of -the costs, in the expectation of substantial compensating benefits. -FC 16.304 Cost-plus-fixed-fee contracts. -This contract type permits contracting for efforts that might otherwise present too great a risk to -contractors, but it provides the contractor only a minimum incentive to control costs. When -considering whether to utilize a completion or term form of a cost-plus-fixed-fee contract, -because of the differences in obligation assumed by the contractor, the completion form is -typically preferred over the term form whenever the work, or specific milestones for the work, -can be defined well enough to permit development of estimates within which the contractor can -be expected to complete the work. -An example of when a cost-plus-fixed-fee contract type may be suitable is when a cost- -reimbursement contract is appropriate and the contract is for the performance of research or -preliminary exploration or study, and the level of effort required is unknown. Cost-plus-fixed-fee -contract type may also be suitable when a cost-reimbursement contract is appropriate and the -44 -Federal Acquisition Regulation (FAR) Companion -contract is for development and testing, and using a cost-plus-incentive-fee contract is not -practical. -A cost-plus-fixed-fee contract normally should not be used in development of major systems -(see part 34) once preliminary exploration, studies, and risk reduction have indicated a high -degree of probability that the development is achievable and the government has established -reasonably firm performance objectives and schedules. -FC 16.403-2 Performance incentives. -Performance incentives may be particularly appropriate in major systems contracts, both in -development (when performance objectives are known and the fabrication of prototypes for test -and evaluation is required) and in production (if improved performance is attainable and highly -desirable to the government). Performance incentives may involve a variety of specific -characteristics that contribute to the overall performance. Accordingly, balance the incentives on -individual technical characteristics so that no one of them is exaggerated to the detriment of the -overall performance. Performance tests and/or assessments of work performance are generally -essential in order to determine the degree of attainment of performance targets. Therefore, be -as specific as possible in the contract in establishing test criteria (such as testing conditions, -instrumentation precision, and data interpretation) and performance standards (such as the -quality levels of services to be provided). -Because performance incentives present complex considerations in contract administration, it is -a best practice to negotiate them in full coordination with government engineering and pricing -specialists. And it is extremely useful if the government and contractor agree explicitly on the -effect that contract changes (e.g., pursuant to the Changes clause) will have on performance -incentives. In establishing performance criteria, the contractor should not be rewarded or -penalized for obtaining government-furnished components. -FC 16.403-3 Delivery incentives. -It is important to determine the government’s primary objectives in a given contract when -establishing delivery incentives (e.g., earliest possible delivery or earliest quantity production). -FC 16.404-1 Fixed-price incentive (firm target) contracts. -Under a fixed-price incentive (firm target) contract, the price ceiling is the maximum that may be -paid to the contractor, except for any adjustment under other contract clauses. When the -contractor completes performance, the parties negotiate the final cost, and the final price is -established by applying the formula. Because the profit varies inversely with the cost, this -contract type provides a positive, calculable profit incentive for the contractor to control costs. -A fixed-price incentive (firm target) contract is appropriate when the parties can negotiate at the -outset a firm target cost, target profit, and profit adjustment formula that will provide a fair and -reasonable incentive and a ceiling that provides for the contractor to assume an appropriate -share of the risk. When the contractor assumes a considerable or major share of the cost -responsibility under the adjustment formula, the target profit should reflect this responsibility. -45 -Federal Acquisition Regulation (FAR) Companion -FC 16.404-2 Fixed-price incentive (successive targets) contract ceiling price. -When the production point specified in the contract is reached, the parties negotiate the firm -target cost, giving consideration to cost experience under the contract and other pertinent -factors. The firm target profit is established by the formula. At this point, the parties have two -alternatives, as follows: -1. They may negotiate a firm fixed price, using the firm target cost plus the firm target profit -as a guide. -2. If negotiation of a firm fixed price is inappropriate, they may negotiate a formula for -establishing the final price using the firm target cost and firm target profit. The final cost -is then negotiated at completion, and the final profit is established by formula, as under -the fixed-price incentive (firm target) contract (see FAR 16.404-1). -FC 16.405 Cost-plus-incentive-fee contracts. -A cost-plus-incentive-fee contract may be appropriate for services or development and test -programs when a cost-reimbursement contract is necessary; and a target cost and a fee -adjustment formula can be negotiated that are likely to motivate the contractor to manage -effectively. Incentives should be tied to established technical performance objectives. This -approach also may apply to other acquisitions, if the use of both cost and technical performance -incentives is desirable and administratively practical. The fee adjustment formula should provide -an incentive that will be effective over the full range of reasonably foreseeable variations from -target cost. If a high maximum fee is negotiated, the contract should also provide for a low -minimum fee that may be a zero fee or, in rare cases, a negative fee. -FC 16.504-1(b) Contractor’s delivery obligations in an indefinite-quantity contract. -Under FAR clause 52.216-22, Indefinite Quantity, the contractor "shall furnish to the -government, when and if ordered, the supplies or services specified in the Schedule up to and -including the quantity designated in the Schedule as the maximum." Consequently, any valid -order placed within the maximum value is binding and must be fulfilled by the contractor. -FC 16.504-4 On-ramps and off-ramps. -On-ramping (adding new contractors) and off-ramping (removing contractors) from multiple- -award contracts, especially when ordering periods are multi-year, helps maintain current, -competitive, and innovative pools of vendors. The process allows for the government to remove -inactive or under-performing vendors or add new vendors to the multiple-award contract. -The government has discretion of how and when to open a multiple-award contract for an on- -ramp or an off-ramp. These processes do not need to occur at the same time. For instance, if -the marketplace has not significantly changed, the government may determine it is necessary to -only conduct an off-ramp to narrow the existing multiple-award contract to only active and well- -performing vendors. Conversely, if the current vendor pool is active and well-performing, but -research demonstrates that sufficient new vendors have entered the marketplace, the -contracting officer may conduct only an on-ramp. -When considering methods to assess the multiple-award vendor pool for purposes of off- -ramping, past performance on earlier orders under the contract should be given priority -consideration (see FAR 16.507-2(c)(2)). -46 -Federal Acquisition Regulation (FAR) Companion -Examples of on-ramp and off-ramp procedures are covered in the Periodic Table of Acquisition -Innovation. -FC 16.505 Strategic inclusion of “continuity of services” and “option to extend services” -clauses. -For recurring and continuous service requirements, contract and order awards can face delays -due to external factors like bid protests, disruptions to the incumbent contractor's business, or -alleged bidding errors. To avoid challenging negotiations for short extensions, consider -incorporating FAR clauses 52.217-8, Options to Extend Services, and 52.237-3, Continuity of -Services, into all indefinite-quantity contracts where orders may be placed for vital services. -Together, these clauses provide up to six additional months of performance beyond the stated -task order period for unforeseen delays, and an extra 90 days for a smooth transition to a -successor contractor or to the government. -FC 16.507 Streamlining ordering procedures. -Implementing efficient ordering procedures is crucial for maximizing the streamlined procedures -under existing vehicles. While it is important to ensure compliance with the ordering procedures -for the specific vehicle, consider the following best practices: -1. Minimize redundant information: Refrain from requiring offerors to resubmit information -that was already provided during the initial vehicle establishment. This not only reduces -the administrative burden on offerors but also expedites the ordering process. -2. Leverage previous evaluations: Unless there is strategic value in doing so, it is not -necessary to re-evaluate information that was already assessed during the vehicle -establishment phase. If the basis of that evaluation is unclear in the associated ordering -guide, reach out to the vehicle contracting officer or program manager to learn more. -Focus evaluation for an order on new or relevant information specific to the order, -ensuring a more efficient and effective evaluation process. -3. Harness innovative techniques: Building on innovative approaches used during the -vehicle establishment, such as oral presentations, can further streamline ordering -procedures. By maximizing the use of these techniques, you can reduce the complexity -and time required for ordering. -FC 16.507-2(a)(2) Periodic Table of Acquisition Innovations (PTAI) procedures for FAR+Your ordering patterns also matter. Predictable, consistent order volumes favor single awards, +allowing vendors to optimize their operations and potentially offer better pricing. Variable or +unpredictable needs may benefit from the flexibility multiple awards provide. +Consider hybrid approaches that blend the benefits of both structures. You might establish +multiple BPAs divided by geographic regions, functional categories, or order value tiers. This +can provide competition where it adds value while maintaining simplicity where it doesn't. +Regardless of your chosen structure, build in flexibility. Include periodic review points to assess +whether the BPA continues to meet your needs and represents best value. Document not just +your decision but your reasoning, focusing on operational efficiency and mission support. +FC 16.507-5(c), 16.508 Strategic management of award notices, debriefings, and protest +windows. +To avoid unnecessarily extending the protest window, the acquisition team led by the +contracting officer should prepare to quickly provide debriefings when requested after making +award decisions and notifying unsuccessful offerors. This timing consideration is relevant for +protestable orders (i.e., for civilian agencies, an order valued in excess of $10 million; for DoD, +NASA, or the Coast Guard, an order valued in excess of $35 million; see 16.508) because +unsuccessful offerors generally have 10 calendar days to file a GAO bid protest from the date +the basis of protest is known. +Note that an automatic stay of performance at GAO is 10 days after contract award or within 5 +days of a debriefing date offered. Please note that if the last day of the computation period is a +Saturday, Sunday, or Federal holiday, then the deadline for filing is the next day the protest +venue (e.g., GAO, soliciting agency) is open. +FC 16.507-5(c) Debriefing best practices. +When debriefings are requested, the acquisition team led by the contracting officer might +consider providing technical evaluation documentation relevant to the requesting vendor. +Providing this transparency may reduce the likelihood of protests due to lack of information. +Debriefings should be framed as opportunities for vendors to learn for future proposal +development and for the government to improve future solicitation preparation.