Cost Analysis of Cost Plus Award Fee Contracts.

A wide selection of contract types is available to the Government and contractors in order to provide needed flexibility in acquiring the large variety and volume of supplies and services required by agencies. Contract types vary according to 1 the degree and timing of the responsibility assumed by the contractor for the costs of performance and 2 the amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals. The two broad categories of contract types available for use in Government contracting are fixed-price and cost-reimbursement. The objective of selecting a contract type is to reasonably allocate performance risk between the contractor and Government while providing incentive to the contractor to perform efficiently and economically. It is important to select the contract type that places the appropriate level of responsibility on the contractor to successfully perform and that is commensurate with the technical and cost uncertainties. Contract types range from Firm-Fixed-Price FFP which places maximum risk on the contractor and minimum risk and administrative burden on the Government to Cost-Plus-Fixed-Fee CPFF which places minimum risk on the contractor and maximum risk on the Government. See Appendix A for a list of contract types