TYPES OF CONTRACTS / INSTRUMENTS

The scope and complexity of DCMA participation will vary depending upon the type of contract involved. The following are special considerations that need to be addressed during the initial review and planning process. The information is grouped by fixed price contracts, cost type contracts and "other" types of contracts such as letter contracts or orders issued under Basic Ordering Agreements.

Administration of Orders (BOAs)
Commercial Contracts
Cost Plus Award Fee Contracts
Cost Plus Fixed Fee Contracts
Cost Plus Incentive Fee and Redeterminable Contracts
Cooperative Agreements
Cost Sharing Contracts
Firm Fixed Price Contracts
Fixed Price with Economic Price Adjustment
Fixed Price Incentive Contracts
Fixed Price Redeterminable Contracts
Firm Fixed Price Level of Effort Term Contracts
Indefinite Delivery Type Contracts
Letter Contracts
Modifications
Non-Procurement Instruments
  Grants and Cooperative Agreements
  Other Transactions
  Technology Investment Agreements
Orders Under BOAs
Paperless Modifications
Time and Materials Contracts


FIXED-PRICE CONTRACTS:
1. Firm-Fixed-Price contracts are used when a fair and reasonable price can be established at the outset. The Government pays the negotiated amount regardless of the contractor’s real cost. This contract type is preferred to all others because it encourages the contractor to contain costsPay special attention to the progress payment clause if applicable.  Refer to Progress Payments guidance.

1.1.  References:
1.1.1.  FAR 32.500, Progress Payments Based on Costs
1.1.2.  DFARS 232.5, Progress Payments Based on Costs
1.1.3.  FAR 52.232-13, Notice of Progress Payments.
1.1.4.  FAR 52.232-14, Notice of Availability of Progress Payments Exclusively for Small Business Concerns
1.1.5.  FAR 52.232-16,   Progress Payments.

 

2. Fixed-Price Incentive contracts are used when the parties can negotiate a target cost, target profit and a ceiling price that provides for the contractor to assume an appropriate share of the risk. Pay special attention to the incentive arrangement/formula, any funds status reports such as the Contractor Performance Report, the progress payment clause, and the Quarterly Limitation on Payments Statements (QLOPS) (refer to FAR 52.216-16 and FAR 52.216-17).  QLOPS are submitted within 45 days after the end of each quarter beginning with the quarter in which delivery is first made and accepted and continuing until negotiation of the final contract price.  Establish a control record on the QLOP Statements and maintain it in Part 5 of the Official Contract File. The ACO is authorized to withhold payment if the contractor does not submit this report on time.  Note, that FAC 97-16 removed the requirement for contracting officers to review quarterly statements, therefore, DCMA personnel are no longer required to compare QLOPS with progress payment requests.  Note also that if a fixed-price incentive contract was awarded after August 31, 1998, and is funded with multiple appropriations, special  requirements for progress payment distribution apply.  See paragraph 8.2 of the Progress Payments Guidebook.    

2.1.  References:
2.1.1. FAR 16.4, Incentive Contracts
2.1.2. FAR 32.500, Progress Payments Based on Costs
2.1.3. FAR 32.606, Debt Determination and Collection
2.1.4. FAR 32.610, Demand for Payment of Contract Debt
2.1.5. FAR 32.613, Deferment of Collection
2.1.6. FAR 32.700, Contract Funding
2.1.7. FAR 42.500, Postaward Orientation
2.1.8. DFARS 216.4, Incentive Contracts
2.1.9. DFARS 232.5, Progress Payments Based on Costs



3. Fixed-Price with Economic Price Adjustment contracts are used to protect the contractor and the Government against significant economic fluctuations in labor or material costs during the period of contract performance.  EPAs are based on established catalog or market prices, actual costs, or cost indices of labor or material. At the end of contract performance, the contractor submits an EPA proposal which the ACO evaluates in order to arrive at a reasonable negotiation position. The contractor is required to certify that all price decreases have been applied and the ACO is responsible for verifying the contractor’s certification as well as the application of all required price decreases.

 

4. Fixed-Price Redetermination contracts are either prospective or retroactive. The prospective type is used when it is possible to negotiate a fair and reasonable price for an initial period but not for subsequent periods. The initial portion of the contract is firm fixed price and will be the longest period possible. The price for subsequent periods is determined through negotiation after completion of the contract and will be for at least 12 months. The retroactive type is used when it is not possible to negotiate a fair and reasonable price for the entire contract period. A ceiling price is established and final price is determined through negotiation after completion of the contract.  Pay special attention to the progress payment clause and the Quarterly Limitation on Payments Reports (refer to FAR 52.216-16 and FAR 52.216-17).

4.1.  References:
4.1.1. FAR 16.4, Incentive Contracts
4.1.2. FAR 32.500, Progress Payments Based on Costs
4.1.3. FAR 32.606, Debt Determination and Collection
4.1.4. FAR 32.610, Demand for Payment of Contract Debt
4.1.5. FAR 32.613, Deferment of Collection
4.1.6. FAR 32.700, Contract Funding
4.1.7. FAR 42.500, Postaward Orientation
4.1.8. DFARS 216.4, Incentive Contracts

 

5. Fixed-Price/Level-of-Effort contracts are used to purchase a specified level of effort over a stated period of time. This type of contract is not considered a predominant contract type. Pay special attention to surveillance of the contractor through analyses of status reports and audit of the contractor’s billings, especially the final billing.

5.1.  References:
5.1.1. FAR 42.302(a)(65), Accomplish Administrative Closeout Procedures
5.1.2. FAR 16.207, Firm-Fixed-Price, Level-of-Effort Term Contracts

 

6. COST CONTRACTS:
6.1. Cost-Plus-Fixed-Fee contracts are used when there are enough uncertainties involved in contract performance to preclude using a fixed price contract. Pay special attention to the Limitation of Cost/Funds clause as well as the contractor’s funds status reports that are identified in the contract. Even though DCAA signs the contractor’s requests for payment, the ACO can at any time during contract performance request an audit of the contractor’s vouchers.  The ACO is responsible for monitoring the contractor’s expenditures.  The contractor’s invoices may be submitted not more than twice monthly.

6.1.2.  References:
6.1.2.1. FAR 32.700, Contract Funding
6.1.2.2. FAR 52.232-20, Limitation of Cost
6.1.2.3. FAR 52.232-21, Limitation of Cost (Facilities)
6.1.2.4. FAR 52.232-22, Limitation of Funds

 

6.2. Cost-Plus-Incentive-Fee and Redeterminable Contracts are used to encourage contractors by providing greater profits through cost savings and/or other performance improvements. Pay special attention to the incentive provisions, funds status reports, and limitation of cost/funds provisions. A Postaward Orientation Conference is helpful if the contractor is new to the incentive provisions.

6.2.1.  References:
6.2.1.1. FAR 16.4, Incentive Contracts
6.2.1.2. FAR 32.606, Debt Determination and Collection
6.2.1.3. FAR 32.610, Demand for Payment of Contract Debt
6.2.1.4. FAR 32.613, Deferment of Collection
6.2.1.5. FAR 32.700, Contract Funding
6.2.1.6. FAR 42.500, Postaward Orientation
6.2.1.7. DFARS 216.4, Incentive Contracts
6.2.1.8. Contract Pricing Reference Guides
6.2.1.9. Pricing and Negotiation Instructions & Guidebook

 

6.3. Cost-Plus-Award-Fee contracts are used to provide additional incentive to contractors to achieve excellence in areas such as quality, timeliness, technical ingenuity, and cost effective management.  Pay special attention to the Award Fee criteria and the rating plan. The contract will provide for interim rating periods during contract performance. DCMA may add value to the Award Fee Evaluation by providing timely input to the Program Manager on observations with regard to the stated criteria.

 

6.4. Cost Sharing contracts are used when the Government pays only a portion of the allowable costs and no fee. This kind of contract is used for R&D work from which the contractor will derive a substantial commercial benefit; such as, the development of Teflon.

 

7. OTHER TYPES OF CONTRACTS:
7.1. Letter contracts are used when the Government’s interests demand that the contractor be given a binding commitment so that work can start immediately, and negotiating a definitive contract is not possible in sufficient time to meet the requirement. Pay special attention to the contractor’s compliance with the definitization schedule and inform the PCO of any anticipated delays. Monitor the contractor’s expenditures and percentage of completion and assure that the limitations established by the PCO are not exceeded. Team with the PCO and offer our services to obtain, review and evaluate the contractor’s proposal for use in negotiating the final contract.   Special considerations apply when making payments under undefinitized contract actions.

7.1.1.  References:
7.1.1.1. DFARS 252.215-7002, Cost Estimating System Requirements
7.1.1.2. DCAA Manual 7640.1, Chapter 5-1000 Section 10
7.1.1.3. DoD Directive 7640.2, Contract Audit Follow-up (CAFU)
7.1.1.4. Field Pricing Support

 

7.2. Time-and-Material (T&M) contracts and Labor Hour (LH) contracts are used when it is not possible to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. The T&M and LH contracts provide no incentive to the contractor for cost control; therefore, perform surveillance on the contractor to assure that the contractor is performing efficiently and using effective cost control measures.  Immediately after award, convene a government meeting with appropriate functional elements to establish a surveillance plan. This plan includes performance of periodic audits of contractor’s billings and periodic floor checks. Pay special attention to the withhold applicable to the contractor’s billings and review paid and rejected vouchers in accordance with the requirements of the Public Vouchers guidebook.  Billings are made by public voucher in accordance with the requirements of the  Public Vouchers guidebook. The ACO is responsible for approving the final voucher in accordance with the  Public Vouchers guidebook.

7.2.1.  References:
7.2.1.1. FAR 16.601, Time-and-materials contracts
7.2.1.2. FAR 16.602, Labor-hour contracts
7.2.1.3. FAR 42.302(a)(7), Determine allowability of costs and approve final vouchers
7.2.1.4. FAR 42.302(a)(9), Establish final indirect cost rates
7.2.1.5. FAR 42.302(a)(65), Accomplish administrative closeout
7.2.1.6. FAR 52.232-7, Payments under Time-and-Material and Labor-Hour Contracts
7.2.1.7. DFARS 242.803(b), Auditor receipt of voucher
7.2.1.8. Briefing - T&M and LH Contracts

 

7.3. Orders issued against Basic Ordering Agreements (BOAs) and Indefinite-Delivery Type Contracts (IDTCs) are priced or unpriced. Both instruments allow orders to be issued against them; however, the BOA is not a contract and the IDTC is a contract. The BOA contains pricing methods, terms and conditions, and a description of the supplies or services to be provided. The IDTC is a contract where exact times and/or quantities for future deliveries cannot be determined at the time of award. When delegated authority to definitize unpriced orders, complete negotiations within the 180 day timeframe. Monitor contractual progress to ensure that payments will not exceed 50% of the not-to-exceed price or 75% of a qualified proposal prior to negotiations.  Refer to Contract Pricing guidanceSpecial considerations apply when making payments under undefinitized contract actions.   

Click on Tank Automotive Command (TACOM)  for guidance on orders issued from TACOM's Direct Vendor Delivery System.

7.3.1.  References:
7.3.1.1. FAR 16.5, Indefinite-Delivery Contracts
7.3.1.2. FAR 16.703, Basic Ordering Agreements (BOAs)
7.3.1.3. FAR 53.105, Computer Generation
7.3.1.4. FAR 53.2, Prescriptions of Forms
7.3.1.5. FAR 53.243, Contract Modifications
7.3.1.6. DFARS 216.5, Indefinite Delivery Contracts
7.3.1.7. DFARS 216.703, Basic Ordering Agreements
7.3.1.8. DFARS 217.74, Undefinitized Contractual Actions
7.3.1.9. DFARS 217.7404, Limitation on Expenditures
7.3.1.10. DFARS 253.2, Prescription of Forms
7.3.1.11. Contract Pricing Reference Guides

 

7.4. Contract Modifications may be either bilateral or unilateral. A bilateral modification is signed by both the contractor and the contracting officer and used to make negotiated equitable adjustments resulting from the issuance of a change order, to definitize letter contracts, and to reflect other agreements of the parties modifying the terms of a contract. A unilateral modification is a modification signed only by the contracting officer and used to make administrative changes (FAR 43.101), issue change orders, issue termination notices, and make changes authorized by clauses such as the Options clause and the Suspension of Work clause.  Modifications may be issued by the PCO or the ACO.  Refer to Contract Pricing guidance for instructions on definitizing modifications.

7.4.1. Modifications can be processed in one of three ways:
7.4.1.1. A modification to a single contract.
7.4.1.2. A manual modification to a group of contracts hereafter referred to as a “class” modification.
7.4.1.3. A computer generated ARZ modification to a group of contracts.  ARZ modifications can only be used for modifications that do not change MOCAS data elements. (MOCAS Transfer Process/ARZ Modifications)

7.4.2. Class or ARZ modifications are used for plant-wide contract changes such as:
7.4.2.1. Name/Address changes
7.4.2.2. Novation Agreements
7.4.2.3. SPI Block Changes

7.4.3. Post all ACO issued modifications to the DoD Electronic Document Access (EDA) Website. There are three methods for posting a modification on EDA: use of the MDO eTool, scanning a hard copy document, or importing an electronic file.

7.4.4. . The contracting officer will obtain and document adequate consideration for changed contract requirements.  Consideration may take the form of a contract price adjustment or other means commensurate with the change in requirements such as expedited delivery; product quality improvements; performance improvements; additional products and services, where legally permissible; improved reliability, maintainability, supportability, producability or warranties; conversion to best practices or performance requirements; insertion of commercial products and services into defense unique commodities; reduction in overhead and infrastructure; ensuring subcontractor conversions to best practices; and reduction in Government oversight requirements.  Sample consideration language may be used to document the consideration decision.

7.4.5. Global Modifications (Blanket Modification for Enhancement of AFMC Automated Systems for Contract Depot Maintenance Activities (INFORMATION))

7.4.6.1.  A global modification or blanket no-cost change order is issued to modify a large number of contracts involving multiple companies.  This approach is used in cases where it’s more efficient or practical than having individual ACOs across the Agency issue substantially identical modifications.  This approach is employed when:
7.4.6.1.1.  Effective delegation of contracting authority from the affected Defense Departments and Agencies has been received by Headquarters, DCMA;
7.4.6.1.2.  The modification will not change the contract value;
7.4.6.1.3.  The modification will be unilateral; and,
7.4.6.1.4.  Its use has been approved by the DCMA Director or Senior Procurement Executive.
7.4.6.2.  Use of this approach may often require action by DCMA ACOs (e.g., distribution of modifications to contractors and Procuring Contracting Officers, negotiation of supplemental agreements if suppliers reject “no-cost” change orders and request equitable adjustments).  Requirements and responsibilities for handling a global modification will be specified in a Tasking Memorandum to the CMO.

Publish all ACO issued modifications on the Internet World Wide Web (WWW). There are three methods for publishing a modification on the WWW: use of the MDO eTool, scanning a hard copy document, or importing an electronic file. Each method is described in the attachment. 

7.4.7.  References:
7.4.7.1. FAR 42.302(a) and (b), Contract Administration Functions
7.4.7.2. FAR 43, Contract Modifications
7.4.7.3. FAR 43.2, Change Orders
7.4.7.4. FAR 52.243-4, Changes
7.4.7.5. DFARS 243, Contract Modifications
7.4.7.6. DFARS 243.2, Change Orders

 

7.5. Commercial Contracts are used as a result of the Federal Acquisition Streamlining Act of 1994 and DCMA can perform Contract Administration Services (CAS) on commercial contracts. Commercial contracts rely on the contractors’ existing quality assurance system as a substitute for Government in-process inspection and testing. DCMA may perform in process inspection only if it is a customary market practice and only if the PCO has included an addendum to the contract specifically tasking these inspections.  Current  information and resources:

The regulatory coverage in the FAR 12, as supplemented by DFARS 212, addresses commercial contracting in general. FAR 32.2, as supplemented by DFARS 232.5, addresses commercial financing arrangements and payments of commercial item purchases. The Guidance for administration of commercial contracts was developed in coordination with the Defense Finance and Accounting Service (DFAS) and is consistent with the DFAS processes for payment of commercial contracts.

Commercial contracting is appropriate for Early CAS involvement by contract administration personnel. Commercial requirements intended to be administered by DCMA will be reviewed whenever possible to ensure that the resulting contract will contain clear, easily understood procedures for item acceptance and for payment. Payment provisions should be reviewed to ensure that they are compatible with FAR 32.2 including being customary in the commercial market place for the item being acquired.  Since commercial item financing and payment provisions can vary depending on commercial practice, contract management personnel will be alert to terms and conditions which may require close monitoring.

Commercial contracts are designated in the Mechanization of Contract Administration Services (MOCAS) system with the R9 Remark 48 code for easy identification of these instruments.  ACOs should be particularly aware of their commercial item workload, including that in MOCAS Contract Administration Report (CAR) Part B, since it will probably require intense interaction with DFAS and with contractors unfamiliar with these procedures. Contract administration personnel should be very proactive in performing postaward orientation, either by conference, letter or telephone, for commercial item contracts, particularly when the contract is the first of its type with the given contractor.

 

8.  NON-PROCUREMENT INSTRUMENTS:
Non-Procurement instruments fall into three basic types: grants, cooperative agreements, and other transactions. A related class of instrument is the Technology Investment Agreement (TIA) which may be either a cooperative agreement or an other transactionOther Transactions and TIAs which are delegated to DCMA for administration will be assigned to CMOs throughout DCMA.

 

8.1. Grants and Cooperative Agreements are used when the principal purpose of the relationship is to transfer a thing of value to the recipient in order to carry out a public purpose of support or stimulation, as authorized by US law. This differs from contracts which usually involve the acquisition of property or services for the direct benefit or use of the Government. Grants are to be used when substantial involvement between the DoD and the recipient is not expected when carrying out the activity contemplated in the agreement. Cooperative Agreements are used when substantial involvement is expected between the DoD and the recipient when carrying out the contemplated activity. Grants are indicated by a "1" in the 9th position of the instrument number. Cooperative agreements are indicated by a "2" in the 9th position of the instrument number. Grants and Cooperative Agreements can be awarded to commercial organizations, nonprofit entities, and educational institutions. Cooperative Agreements are used with entities that furnish procurement technical assistance to businesses. Grants and Cooperative Agreements are legal instruments but they are not contracts and they are not subject to the FAR; however, they are subject to the DoD Grants and Agreements Regulatory System (DoDGARs).  Only Administrative Grants Officers (AGOs) are authorized to administer grants and cooperative agreements.  Upon receipt of a Grant or a Cooperative Agreement, the CMO team should meet and determine the extent of surveillance to be performed. The CMO team should also advise nonprofit recipients of certain requirements concerning competition in procurement of audit services, and the treatment of rebates related to allowable charges against Government awards. Attached is information concerning procurement of audit services for recipients of grants and cooperative agreements.

8.1.1. References:
8.1.1.1. DoD 3210.6-R,Department of Defense Grants Regulations
8.1.1.2. OMB Circular A-87, Cost Principles for State and Local Governments
8.1.1.3. OMB Circular A-102, Grants and Cooperative Agreements with State and Local Governments
8.1.1.4. OMB Circular A-110, Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations
8.1.1.5. OMB Circular A-122, Cost Principles for Nonprofit Organizations
8.1.1.6. OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations

 

8.2. Other Transactions (OTs): Public Law 10 U.S.C. 2371 provides the Department of Defense authority to enter into transactions (other than contracts, cooperative agreements and grants) for certain projects. Consequently, other transactions are defined by what they are not, rather than what they are. Any instrument that is not a contract, cooperative agreement, or grant is considered an "other transaction". The two types of other transactions that are likely to be assigned to DCMA for administration are OTs for research and OTs for prototype. OTs for research are designated by a "3" in the 9th position of the instrument number. OTs for prototypes awarded after October 1, 1997 are designated by a "9" in the 9th position of the instrument number. OTs are not covered by the FAR or its supplements, and are meant to be flexible instruments. The terms and conditions of individual agreements can vary greatly from one instance to another in support of individual program objectives.  Only Administrative Agreements Officers (AAOs) are authorized to administer OTs.  OTs delegated to DCMA for administration are assigned to CMOs throughout the Agency.

 

8.3. Technology Investment Agreements (TIAs): TIAs are a class of assistance instruments that may be used to carry out basic, applied, and advance research projects when it is appropriate to use assistance instruments, and the research is to be performed by a for-profit firm, or by consortia that include a for-profit firm. TIAs replaced two types of assistance instruments: "consortium agreements", a type of OT used by the Defense Advance Research Projects Agency (DARPA), and "cooperative agreements under 10 U.S.C. 2371", addressed in Part 37 of the 1994 Draft Interim Guidance DoDGARs, and also referred to as "flexible cooperative agreements". A TIA is a type of cooperative agreement (awarded under the authority of 10 U.S.C. 2358) when its patent rights provision complies with the Bayh-Dole statute (Chapter 18 of Title 35, U.S.C.). A TIA is a type of other transaction (awarded under the authority of 10 U.S.C. 2371) when its patent rights provision is less restrictive than is possible under Bayh-Dole. An OTs for prototype is not covered under the TIA classification. TIAs are also administered by CMOs throughout DCMA offices. Both the DODGARS and Supplemental Revision 2, February 3, 1999 to the DoDGARs govern TIAs.  Only Administrative Agreements Officers (AAOs) are authorized to administer TIAs.

8.3.1. References:
8.3.1.1. DoD 3210.6-R,Department of Defense Grants Regulations
8.3.1.2. OMB Circular A-87, Cost Principles for State and Local Governments
8.3.1.3. OMB Circular A-102, Grants and Cooperative Agreements with State and Local Governments
8.3.1.4. OMB Circular A-110, Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations
8.3.1.5. OMB Circular A-122, Cost Principles for Nonprofit Organizations
8.3.1.6. OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations
8.3.1.7. Section 845 Other Transaction Authority
8.3.1.8. Guidance on Technology Investment Agreements, General Discussion
8.3.1.9. Revision 2 to Guidance on Technology Investment Agreements
8.3.1.10. Defense Grant and Agreement Circular 94-7
8.3.1.11. Section I.E of the DDR&E February 4, 1994 Memorandum
8.3.1.12. Part 37 of the DoD Grant and Agreement Regulations
8.3.1.13. Part 34 of the DoD Grant and Agreement Regulations
8.3.1.14. DCAA Audit Guidance on Evaluation of Other Transaction Agreements (OTAs)