Contract Type

In federal procurement, contract type specifies how costs, risks, and responsibilities are allocated between the government and the contractor. Common types include fixed-price, cost-reimbursement, time-and-materials, and labor-hour contracts. The choice of contract type affects pricing, oversight, and contract administration. Understanding contract type is essential for interpreting obligations, performance incentives, and compliance requirements in federal contracts.

Contract type directly impacts how much financial risk the government or contractor assumes and influences contract management strategies. Analysts use contract type to assess spending patterns, risk exposure, and market trends. It is also critical for compliance reviews and for understanding pricing flexibility or constraints in federal acquisitions. Properly identifying contract type helps in benchmarking and comparing procurement actions across agencies or industries.

In FPDS, contract type is a coded data element, typically labeled as 'Type of Contract' or 'Contract Type', and is used to categorize each award. Users often filter or group data by contract type to analyze spending, risk distribution, or acquisition strategy. Contract type codes are standardized and can be searched or reported on in FPDS queries and analytics dashboards.

A common misunderstanding is assuming that all federal contracts are fixed-price or that contract type only affects payment terms. In reality, contract type also determines risk allocation, oversight requirements, and allowable cost structures.

For example, a cost-plus-fixed-fee contract reimburses the contractor for allowable costs plus a fixed fee, while a firm-fixed-price contract pays a set amount regardless of actual costs incurred. Analyzing contract type helps identify which contracts may require more oversight or pose higher risk.

• FAR Part 16 — Types of Contracts