What are the main types of government contracts?
A government contract is a legally binding agreement in which a federal agency buys goods or services from a business. The main pricing types are firm-fixed-price, cost-reimbursement, time-and-materials and labor-hour, and much work is ordered under vehicles such as IDIQ contracts, GSA Schedules and BPAs.
Firm-fixed-price
The price is set at award and does not change with your costs. Most common for small businesses and commercial items. You carry the cost risk, so pricing has to be right the first time.
Cost-reimbursement
The government pays allowable costs plus a fee. Used when the work is too uncertain to price up front. It requires an adequate accounting system, which keeps many small firms out.
Time-and-materials and labor-hour
The government pays fixed hourly rates for labor, plus materials at cost for T&M. Used when the amount of work cannot be estimated. Your rates are fixed, the hours are not.
IDIQ, GSA Schedules and BPAs
Indefinite-delivery, indefinite-quantity contracts set the terms, and agencies place task or delivery orders against them later. GSA Multiple Award Schedules and blanket purchase agreements work similarly. Winning a vehicle is a license to compete for orders, not a guarantee of revenue.
RFQ, RFP and IFB
These are how work is solicited, not contract types. A request for quotation asks for a price, a request for proposals asks for a scored proposal, and an invitation for bids is sealed bidding, where price decides among responsive offers.
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