Government Contract Types

Okay, okay, I’ve gone a little overboard with the space-related content, but that’s been on my mind lately. Today I’ll switch over to something that’s a bit broader, as it relates to anyone working on proposals in Government Contractor World. Happy reading!

The U.S. Government issues different contract vehicles for different types of efforts. These contracting methods are set up so as to make it easier for the contractors to bid (and bill) and as cost-effective as possible for the government to pay without busting the budget. I won’t cover every single variation of the contract beast, but I’ll share enough to give you the big picture.

Cost-Plus

As I mentioned a couple posts ago, many large, difficult development projects (especially at NASA) have been set up as “cost-plus” contracts. A cost-plus contract means that the contractor will be paid for its incurred costs (labor, materials, travel, and other direct costs/ODCs); they’ll also–depending on specific performance expectations–receive an extra fee, which is an award for completing the work to or above the government’s expectations. You’ll see these contracts called Cost Plus Fixed Fee (CPFF) or Cost Plus Incentive Fee (CPIF), which is awarded if the contractor does the work better, faster, or cheaper than originally expected.

“Cost-plus” contracting gets a lot grief in the aerospace world because it can cause costs to balloon. However, if the contractor is being asked to build something that’s never been built before, it often makes more sense. The incentive or fixed fees could be withheld if the contractor doesn’t do the job with the speed/quality/promptness that they expected.

Firm Fixed Price

Firm fixed price (FFP) contracts mean that the contractor is expected to work for a predetermined amount, out of which they are expected to recoup their material, labor, and other costs as well as profit. FFPs are good for contracts where the product or service being delivered is a known quantity.

Time & Materials

Time and Materials (T&M) contracts are good for activities such as refurbishments or painting, where the full amount or duration of the work is not yet known. Because of the unknowns involved, reporting requirements and government oversight of billable hours/materials can be more stringent than usual.

Indefinite Delivery/Indefinite Quantity

The Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts are often service-related contracts for activities such as engineering or communication, where the customer has existing but unpredictable needs (downtimes, surge). Work under ID/IQs is often issued under a series of task or delivery orders, with a minimum payment due to the contractor if the customer does not use their services and a contract ceiling above which the contractor cannot bill. If the contractor hits their billing ceiling, the government customer might raise that ceiling or extend the contract if the services are needed. I’ve also seen FFP contracts with ID/IQ task orders, where the government will not raise the funding ceiling. In those situations, the onus falls on the contractor to “work smart” and estimate their costs well…while at the same time offer a bid that will beat the competition.

You can find more details here.

Why should a technical writer need to know this information? If you’re working for a government contractor and are helping write their proposals, you need to understand what type of contract your organization is bidding on and what language you should include to ensure that the government feels its needs are being met, especially in situations where the scope of work is unknown but likely to be expensive. If the most important evaluation criterion of a solicitation is the cost, you need to be able to show how your company can minimize cost in a dynamic or uncertain environment. If the most important evaluation criterion of a solicitation is getting the technology right, you make certain that your technical approach volume is the strongest, and so forth. Bon voyage, and happy proposing!

About Bart Leahy

Freelance Technical Writer, Science Cheerleader Event & Membership Directior, and an all-around nice guy. Here to help.
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