List of All Types of Government Contracts
Joint ventures, set aside contracts, fixed-price contracts, and incentive contracts are some of the government contracts that you can often hear when transacting with the federal government.
Indeed, the federal government offers business opportunities in different contract forms. With so many types of government contracts different benefits come from it, but how do they really work?
Want to know how each type of government contract works? Keep reading below because we have listed all types of government contracts and their purpose.
What are the 3 types of contracts?
Before we jumped into the long list of government contracts, let us first discuss the three categories of government contracts.
From the tiniest push pins to pens, bolts, nuts to aircraft machineries, the federal government agencies are purchasing so much goods at no particular time. Since there is no certain time whenever a federal government department will be needing some goods they always purchase it in bulk. That being said, the only way you can successfully win a goods contract is by making sure that your company or business have exactly what the government department or contracting officer is looking for.
Since the government has thousands of employees, you may think that they won’t be needing any help, but they really do. In fact the truth is government agencies are working with businesses offering services like, lab testing, consultancy, cleaning, etc.
However keep in mind that when federal agencies offer service-category contracts, they would be asking for a demonstration and verification that your business can provide what they are looking for. Whenever you meet their requirements then you will have the best chance of bidding and winning these kinds of government contracts.
Research and Technical Assistance
Research and development work and technical assistance government contracts are agreements that are similar to service based contracts. Research and development contracts are often offered to companies who can examine legal papers required by government agencies. Meanwhile, for technical assistance, it is given to companies who often specialize with computers and technology. However, research and technical assistance come together, since many companies can handle both assistance.
You may take advantage of these types of government contracts if your business can handle all the necessary things needed. Also, if your company has a solid portfolio or a reputable searchable database on the federal procurement data system many government agencies may be interested in your brand.
Once you have successfully won these types of government contracts, you can indeed increase the reputation and revenue of your company, which can bring great success to your business in the government contracting industry.
These three are just the general types of government contracts that the federal government can offer. Generally speaking bidding for government contracts may seem hard, but if you know the simple dos and don’ts in the filing process and the basics of government contracting, everything will flow flawlessly.
On the other hand, always keep in mind that while working with the federal government, the integrity of your company is on the line. That being said, make sure that you have the confidence to deal with their qualifications and requirements.
What are the most common government contracts?
The contracts mentioned above are just the general types of government contracts. The following is more detailed information on certain government contracts.
1. Fixed-price contracts
A firm fixed price contract is an agreement where the price ceiling does not change. These types of government contracts are classified as one of the riskiest as it comes with all full responsibility for earning, expenses and losses.
As government contractor work under a firm fixed price contract, it gives them the most advantage of keeping costs under control and accomplishing the project successfully without putting too much administrative burden on both contracting parties.
The following are sub categories of fixed price contracts:
I. Fixed-price contracts with economic price adjustment.
There are times that fixed price contracts may come with economic price adjustment. These occurs when:
A. There is a feeling of uncertainty about the market or the employment condition based on its contract performance.
B. Contingencies that would otherwise be factored into the contract price can be identified and addressed separately.
II. Fixed price incentive contracts
A fixed price incentive contracts is a government contract where compensation or profit is adjusted based on the final negotiated fee and the overall result of a contractor’s work.
III. Fixed-price contracts with prospective price redetermination.
Fixed price contracts with prospective price redetermination can provide the following in the future:
A. a fixed price for the first period of the contract performance or deliveries
B. prospective price redetermination of the price ceiling during the contract performance or at specified time.
Fixed price contracts with prospective price redetermination gives a government contractor an ability to acquire manufacturing and services. It is possible to get a reasonable firm fixed price only for an initial time but not when the contract performance has been initiated.
D. Fixed-ceiling-price contracts with retroactive price redetermination.
A fixed ceiling price contracts equipped with retroactive price redetermination are used most of the time for research and development contracts having a worth of less than the acquisition threshold.
The ceiling price for these contracts are agreed based on the contractor’s reasonable risk involved. Only contracts requiring adjustable contract price under specified conditions may cause the established prices to be modified.
The fixed ceiling price contracts are awarded only when a fair and proper billing fee has been negotiated. Since a private business does not have access to cost-control incentives with this contract type. That is why if you are possibly working under these types of government contracts make sure that you get to clarify every information to the contracting officer.
E. Firm-fixed-price, level-of-effort term contracts.
A firm fixed price contracts is often used for research and development contracts. The outcome under firm fixed price is based on the level of effort that a government contractor exerts. The payment on the other hand depends on the amount of effort rather than the finished product.
2. Cost-reimbursement contracts
Cost reimbursement contracts are contracts that pay for authorized expenditures to the amount specified in the contract. In government contracting, these types of federal government contracts establish a cost estimate for obligated funds and price ceiling that the contractor may not exceed, especially without the consent of the contracting officer.
Just like the firm fixed price contracts, cost reimbursement contracts also come with different subcategories, they are as follows:
A. Cost contracts
Cost contract in cost reimbursement contracts is where a government contractor is not compensated in any way. A cost contract is used most of the time for research and development especially for nonprofit educational institutions or other nonprofit organizations.
B. Cost-sharing contracts
Under the cost sharing contract the government contractor is given reimbursement for the portion of the agreed costs rather than receiving compensation.
C. Cost-plus-incentive-fee contracts.
A cost plus incentive is a contract where the negotiated charge is later increased depending on the total permitted costs and total target costs.
D. Cost-plus-award-fee contracts.
Cost plus award fee contracts includes a charge that includes the cost of a specified amount at the start of the contract and an award based on the contract performance.
E. Cost-plus-fixed-fee contracts.
Cost plus fixed fee contract is a subcategory of cost reimbursement contract where a contractor receives an agreed charge at the start of the project.
With cost reimbursement contracts the set price does not alter but it may be adjusted if the work if the task under the government contract changes. Cost reimbursement government contracts allows contractors to bid for tasks that would be risky for them but only gives a minimal incentive fees to keep the prices under control.
3. Incentive Contracts
In certain situations, where products and services can be obtained for less costs a firm fixed price is inapplicable, more often incentive contracts are used aiming to have a better delivery or technical performance. An incentive contract type matches the amount of profit or fee payable to the contractor’s performance.
The incentive contracts are made to primarily help achieve certain acquisition goals through the means of:
- Establishing an attainable target conveyed to the government contractor in a clear and concise manner
- Incorporating proper incentive structure meant to encourage government contractor to make efforts that may go unnoticed
- Incorporating proper incentive to discourage contractors from inefficiency.
Incentive contracts increase in profit for achievement that exceeds the contract targets, and it may decrease if the supplied product or services do not meet the targeted performance.
4. Indefinite-Delivery Contracts
An indefinite delivery contracts are used when the exact timings purchasing products or services are undefined. This contract type are divided into three categories
A. Definite-quantity contracts.
The definite quantity contracts set out the specific number of products or services needed for a certain time frame, with deliveries or performance scheduled at specific locations upon request.
B. Requirements contracts.
Requirement contracts fill all the purchasing requirements for products or service during the contract period with the federal government. Having the delivery or performance needed by placing orders to the government contractor.
C. Indefinite-quantity contracts.
Indefinite quantity contracts state the indefinite number of goods or services within certain boundaries for a set period of time. Orders are placed by the contracting officers or federal departments for certain needs. The number of limits allowed in quantity contracts are displayed in many different ways such as a number of units or as a dollar amount.
5. Time-and-Materials, Labor-Hour, and Letter Contracts
A. Time-and-Materials contracts
Time and materials contracts as well as labor hour contracts are the total opposite of fixed price contracts. Time and materials contracts are used when the scope of the project or any changes that may occur during the project cannot be predicted. Having said that, businesses offering construction and product development services are the ones who work for this contract type.
B. Labor-hour contracts.
The difference between labor hour contracts to time and materials contracts is that in labor hour contracts the government contractor does not provide the materials. For the contract type the contracting officer’s review material prices, set a per hour labor rate and a price ceiling.
C. Letter contracts.
Letter contracts are documented preliminary contracts that enable a government contractor to immediately start manufacturing products or provide services. This contract type may be used when:
- The interest of a government department or contracting officer demands the government contractor to be given a firm promise to let the construction or procurement to start right away.
- It is impossible to establish a conclusive contract agreement in time to fulfill the deadline. However, given the conditions, a letter contract should always be as specific as possible and have detailed information.
There are times that a contracting officer may award a letter contract on the basis of price competition. When this scenario comes up, the contracting officer or procuring agency assures that the government contract has an overall price ceiling.
If you have any more questions or want to gain more thorough information about different government contracts you may want to check the official website of the United States government for acquisition and procurement – acquisition.gov.
6. Set aside contracts for small businesses
There are many types of government contracts that many large and known government contractors battled out. But, the government also made different types of government contracts that are just meant to be given to small businesses.
These government contracts come with different benefits that can help a small disadvantaged business into a great one. Since these types of government contracts can provide lots of opportunities to small businesses, the contracting officers and procuring government limits competition to them to ensure that they are giving a fair level of competitive bidding process.
The set aside contracts that help small businesses to compete and win federal contracts come in two kinds – competitive set aside, and sole source set-asides.
A. Competitive set-aside
A competitive set aside government contract is given when at least two small businesses are capable of delivering or performing the needed product or services. Most of the time competitive set aside happens automatically for government contracts amounting under one hundred fifty thousand dollars.
While bidding for a competitive set aside contract, a qualified small business can still apply for some set aside. While for other small businesses they are only allowed to participate in contracting opportunities run by the Small Business Administration or SBA.
B. Sole-source set-aside
Sole source contracts are types of government contracts that are awarded to small businesses without having a competitive bidding process. This procurement option is common in cases where the specification of government contracts can only be attained by a single small business.
When a sole source contract is given to a small business, it is labeled and made known to the public. However, these contracts are still available for potential vendors to view and bid on. Meanwhile, in order for your business to be qualified for this contract type you must first register your small business to the System for Award Management or SAM.
7. Joint ventures
The Small Business Administration offers a mentor-protégé program where a small business with a mentor-protégé relationship can form a joint venture with a large business mentor.
Once these joint ventures for their qualifications that the SBA requires, they can then compete for government contracts that are only available to small businesses. Aside from that, it can also compete on set aside contracts meant for service-disabled veteran-owned, HUBZone, or women-owned small businesses.
Government contracting assistance program
Aside from above mentioned contracts there are still set aside government contracts under the government contracting assistance program. Businesses that are qualified for this are the following:
A. Woman-owned small business (WOSB)
Once a women owned small business is eligible to be part of the small business federal contracting program, it automatically gets qualified to compete for federal contracts specifically made for the program.
The government limits competition to women owned small businesses engaging in government contracting to ensure that it creates a full open and open competitive bidding process.
On the other hand, minorities owning a business can also be part of the government contracting assistance program, and required to be granted sole source contracts by contracting officers.
B. Service-disabled veteran-owned small business (SDVOSB)
Every fiscal year the federal government allocates a portion of government contracts for small businesses owned by veterans. Service disabled veteran owned small businesses can compete for prime contracts with the Department of Veterans Affairs (VA).
In order to be qualified for the program, a small business must be legally registered as veteran owned small businesses or service disabled veteran owned small businesses. The Department of Veterans Affairs’ Vets First Verification program may be able to help them get their certification.
Just like the WOSB, the government limits competition for government contracts set aside for the VOSB or SDVOSB small business owners.
C. Historically underutilized business zones (HUBZones)
Historically underutilized business zones are certified to get ten percent price evaluation and eligibility for different types of government contracts once they have successfully passed through the Small Business Administration’s requirements.
As long as a small business qualifies, there is no limit on how long it can engage in the HUBZone programs. All they have to do is to recertify for the program once a year while taking an examination every three fiscal years.
Meanwhile, the Small Business Administration may unexpectedly visit a categorized HUBZones small business and conduct inspection to ensure whether the information they have given for the program application or recertification process is precise or not.
D. 8(a) programs
The 8(a) program aims to help all the small businesses owned by socially and economically disadvantaged owners. The 8(a) program comes in handy for producing sales funnels or winning awards from the federal marketplace.
Small businesses who take part in the program are given training and technical assistance to help them effectively compete for a government contract. Just like the three programs mentioned above, the Small Business Administration constantly communicates with the federal agencies to encourage maximum participation of businesses in the 8(a) program, while ensuring fair and equal opportunities to everyone.
The 8(a) program is once in a lifetime opportunity for any small businesses and individuals. Furthermore, participants of the program can do the following:
- Compete for set-aside and sole source contracts
- Create joint ventures with an established business
- Free training from the 7(j) management and technical assistance by the Small Business Administration
- Participate in the SBA Mentor-Protégé program
- Qualify to receive federal surplus property
Dealing with a government contract is pretty overwhelming especially for a small business. There are so many terms, paperwork, and necessary requirements needed to have. Having that said, a business may consider doing subcontracting.
Subcontracting is where a business or prime contractor allocates a portion of the existing contract to a small business or another business. A contractor is required by federal agencies to hire subcontractors to help them with the responsibility for the project completion, meeting the deadline and the execution needed for the project.
With the contractor-subcontractor relationship, a subcontracting business can learn about how the government contracting industry works, and develop networks.
Federal subcontracting usually happens in a market where complex projects are given like construction and information technology. Companies working under these niches are required by the procurement law to hand out a part of their contract to small businesses or other contracting companies.
Indeed government contracting is overwhelming, but once you have successfully learned how the industry works, you will surely find a way to bid for the different types of government contracts. Listed in this article are the different government contracts that you can possibly encounter.