How Does the Federal Government Buy What They Need? Part Two: Contract Types

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In a previous blog we discussed the various ways the government buys – from micro-purchases, to simplified acquisition, sealed bids, Requests for Proposals or Quotes, and consolidated purchasing vehicles like GSA Schedules. What types of contracts can be used?

Fixed Price Contracts (FFP)

The most common type of contract for small businesses. An FFP contract may be used for a one-time purchase of an item; a multi-year contract may include a base year price plus an Economic Price Adjustment for subsequent option years, either as a pre-negotiated % increase, or an increase linked to commercial prices.

Cost-Reimbursement Contracts

Provides payment of allowable incurred costs; establishes an estimated total cost, and a not-to-exceed ceiling cost; includes Cost-Plus Fixed-Fee, Cost-Plus-Incentive and Cost-Plus-Award

Indefinite Delivery, Indefinite Quantity (IDIQ) Contracts

Used to acquire supplies or services when the exact times or quantities are not known at the time of award; may be for a single year, or for a base year plus a number of option years; orders are placed against the contract as needed; may be issued by a specific agency or may be a multi-agency or government-wide contract, such as a GSA Schedule award, which can be used by ANY federal agency.

Time & Materials and Labor Hour Contracts

Contracts are awarded on the basis of direct labor hours at a fixed hourly rate, (wages, overhead, general and administrative expenses, and profit) plus a cost for materials if appropriate.

Basic Order and Blanket Purchase Agreements (BOAs and BPAs)

A BOA outlines terms and clauses that apply to a future contract; includes a description of supplies or services to be provided and the methods for pricing, issuing and delivering future orders under the agreement.  A BOA can expedite a future contract when quantities and prices are not yet fixed, but the agency expects to purchase a substantial number of these items during the terms of the agreement.

A BPA is a simplified method of filling anticipated repetitive requirements (for example office supplies); sets up an ‘account’ when the agency generally purchases a variety of items in a broad class of supplies, but exact items and quantities aren’t known in advance; reduces the need to issue individual Purchase Orders each time the agency needs an item .

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