Identifies the contract type (fixed-price, cost-reimbursable, time-and-materials, etc.)
Applicability: Included in all contracts to define cost and risk allocation.
Key Requirements
Understand risk allocation based on contract type (fixed-price vs. cost-plus)
Plan cost management and schedule control according to contract type
Document costs properly based on contract type requirements
Budget for contingency appropriately to your risk under the contract type
Common Issues & Pitfalls
Bidding fixed-price without adequate contingency for cost overruns
Not understanding cost-plus profit calculation and allowability
Failing to manage changes differently based on contract type
Not tracking actual costs for cost-reimbursable contracts properly
Contractor Guidance for Your Bid
Contract type determines your financial risk. Fixed-price: you bear cost risk (bid with adequate margin). Cost-plus: government bears risk (cost transparency critical). Time-and-materials: you control hours, government controls scope. Understand your risk profile and bid/manage accordingly. A low fixed-price bid that doesn't account for risk is a path to financial loss.
Related FAR Clauses
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