[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR16.103]

[Page 294]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 16--TYPES OF CONTRACTS--Table of Contents
 
                 Subpart 16.1--Selecting Contract Types
 
Sec. 16.103  Negotiating contract type.

    (a) Selecting the contract type is generally a matter for 
negotiation and requires the exercise of sound judgment. Negotiating the 
contract type and negotiating prices are closely related and should be 
considered together. The objective is to negotiate a contract type and 
price (or estimated cost and fee) that will result in reasonable 
contractor risk and provide the contractor with the greatest incentive 
for efficient and economical performance.
    (b) A firm-fixed-price contract, which best utilizes the basic 
profit motive of business enterprise, shall be used when the risk 
involved is minimal or can be predicted with an acceptable degree of 
certainty. However, when a reasonable basis for firm pricing does not 
exist, other contract types should be considered, and negotiations 
should be directed toward selecting a contract type (or combination of 
types) that will appropriately tie profit to contractor performance.
    (c) In the course of an acquisition program, a series of contracts, 
or a single long-term contract, changing circumstances may make a 
different contract type appropriate in later periods than that used at 
the outset. In particular, contracting officers should avoid protracted 
use of a cost-reimbursement or time-and-materials contract after 
experience provides a basis for firmer pricing.
    (d) Each contract file shall include documentation to show why the 
particular contract type was selected. Exceptions to this requirement 
are:
    (1) Fixed-price acquisitions made under simplified acquisition 
procedures,
    (2) Contracts on a firm fixed-price basis other than those for major 
systems or research and development, and
    (3) Awards on the set-aside portion of sealed bid partial set-asides 
for small business.

[48 FR 42219, Sept. 19, 1983, as amended at 50 FR 1742, Jan. 11, 1985; 
50 FR 52429, Dec. 23, 1985; 54 FR 5054, Jan. 31, 1989; 60 FR 34756, July 
3, 1995; 60 FR 48260, Sept. 18, 1995; 61 FR 39198, July 26, 1996]