Government Contract Types
Understanding different federal contract types and which ones are right for your business
Federal agencies use various contract types to procure goods and services, each with different risk allocations, pricing structures, and administrative requirements. Understanding these contract types is essential for:
- Pricing strategies - Each contract type requires different pricing approaches
- Risk management - Understand who bears cost, schedule, and performance risk
- Bid/no-bid decisions - Some contract types favor certain business models
- Contract administration - Compliance requirements vary by type
Learn how IDIQ contracts work in government contracting. Understand task orders, ceiling values, minimum guarantees, and how to win IDIQ contract opportunities.
Understand Blanket Purchase Agreements (BPAs) in government contracting. Learn how BPAs work, how to establish them, and strategies for winning BPA opportunities.
Learn about Firm Fixed Price (FFP) government contracts. Understand pricing strategies, risk management, and how to win and perform FFP contract work.
Understand Cost-Plus and cost-reimbursement government contracts. Learn about CPFF, CPIF, CPAF structures, allowable costs, and how to manage cost-type contracts.
Learn about Time and Materials (T&M) government contracts. Understand hourly rates, material costs, ceiling prices, and how to win and manage T&M contract work.
Learn about Labor Hour (LH) government contracts. Understand how LH differs from T&M, when it is used, and how to price and manage labor hour contract work.
Complete guide to GSA Schedule contracts. Learn how to get on a GSA Schedule, pricing strategies, compliance requirements, and maximizing Schedule sales.
Understand Government-Wide Acquisition Contracts (GWACs). Learn about major GWAC vehicles, how to get on GWACs, and strategies for winning GWAC task orders.
Learn about Best-in-Class (BIC) government contracts. Understand BIC designation, category management, and how BIC impacts government procurement strategy.
Complete guide to SBIR and STTR government contracts. Learn about funding phases, eligibility requirements, proposal strategies, and commercialization pathways.
Contract Type Categories
Contractor agrees to deliver for a set price. Contractor bears cost risk but keeps any cost savings.
- - Firm-Fixed-Price (FFP)
- - Fixed-Price Incentive (FPIF)
- - Fixed-Price with Economic Price Adjustment (FP-EPA)
Government reimburses allowable costs plus fee. Government bears cost risk. Used for R&D and uncertain requirements.
- - Cost-Plus-Fixed-Fee (CPFF)
- - Cost-Plus-Incentive-Fee (CPIF)
- - Cost-Plus-Award-Fee (CPAF)
Payment based on hourly rates and materials at cost. Hybrid risk allocation. Requires strong oversight.
- - Time-and-Materials (T&M)
- - Labor Hour (LH)
Umbrella contracts for ordering as needed. Establishes terms upfront, orders placed over contract period.
- - IDIQ (Indefinite Delivery/Indefinite Quantity)
- - BPA (Blanket Purchase Agreement)
- - Definite Quantity
- - Requirements Contracts
What are the main types of government contracts?
The main types include Fixed-Price contracts (FFP, FPIF, FP-EPA), Cost-Reimbursement contracts (CPFF, CPIF, CPAF), Time-and-Materials (T&M), Labor-Hour (LH), and Indefinite Delivery contracts (IDIQ, BPA). Each type allocates risk differently between the government and contractor.
Which government contract type is best for small businesses?
For small businesses new to government contracting, Firm-Fixed-Price (FFP) contracts are often easiest because they offer predictable revenue. GSA Schedule contracts are also excellent because they pre-negotiate terms and allow agencies to order directly. Small businesses should also explore SBIR/STTR programs designed specifically for innovation.
What is the difference between IDIQ and BPA contracts?
IDIQ (Indefinite Delivery/Indefinite Quantity) contracts are competed and awarded to one or more contractors for specific services/products with minimum/maximum order quantities. BPAs (Blanket Purchase Agreements) are simplified agreements for recurring needs, often established against existing contracts like GSA Schedules, with streamlined ordering procedures.
How do I know which contract type an agency will use?
Agencies determine contract type based on risk allocation, requirement clarity, and procurement regulations (FAR Part 16). Fixed-price is used when requirements are well-defined. Cost-reimbursement is used for R&D or unclear scopes. The solicitation will specify the contract type. Review agency forecasts and historical data to anticipate which types they commonly use.
What is a GSA Schedule contract?
A GSA Schedule (also called GSA Multiple Award Schedule or MAS) is a long-term governmentwide contract that pre-negotiates pricing, terms, and conditions for products and services. Once on schedule, contractors can receive orders from any federal agency without full competition. It is one of the best vehicles for consistent government business.
What are GWAC contracts?
GWACs (Government-Wide Acquisition Contracts) are pre-competed contract vehicles for IT products and services that any federal agency can use. Major GWACs include Alliant 2, STARS III (8(a) set-aside), CIO-SP3/4, and OASIS. Getting on a GWAC requires significant past performance but provides access to billions in contract opportunities.
How does pricing work for different contract types?
Fixed-price contracts pay a set price regardless of actual costs (contractor bears risk). Cost-reimbursement pays actual costs plus fee (government bears risk). T&M pays hourly rates plus materials at cost. IDIQ/BPA establish rates but payment is per task order. Understanding pricing risk is crucial for profitability on each contract type.
Can small businesses compete for large IDIQ contracts?
Yes, many IDIQ vehicles have small business set-asides (like STARS III, 8(a) STARS). Even on full and open IDIQs, small businesses can compete for set-aside task orders. Small businesses can also subcontract under large IDIQ holders to build past performance before pursuing prime contracts.
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