10.3 Selecting & Documenting Contract Type

10.3 Selecting & Documenting Contract Type

Quick Answer: Match requirement clarity + cost uncertainty + market + admin capacity to contract type. Negotiate type and fee when the deal allows. Combine types on CLINs only with logic. Document the rationale in the acquisition plan/file. Avoid the trap of cost-type/T&M for well-defined work and the opposite trap of forced FFP for pure R&D uncertainty.

Sections 10.1 and 10.2 built the type catalog. Section 10.3 is the decision engine CON 3990V actually tests: given facts, which type, why, how documented, and what negotiation moves make sense. Award-phase competencies (price/cost analysis, negotiation planning, source selection) all assume you did not cripple the deal with the wrong risk allocation.

The selection framework

Use a repeatable filter—closed-book friendly:

Step 1 — How well is the requirement defined?

Step 2 — Who should hold cost risk?

• If the contractor can control and estimate costs → put cost risk on contractor (fixed-price).
• If neither party can estimate well → Government accepts more cost risk (cost-reimbursement) with controls.
• If you need start-now authority → letter contract then definitize to the right long-term type.

Step 3 — What will the market accept and price competitively?

Market research (Part 10) tells you whether industry will bid FFP or will walk / load impossible contingency. A theoretically “preferred” FFP that yields no offers or fantasy prices fails best value.

Step 4 — Can the Government administer the type?

Selecting CPAF with no capacity to run award fee is a planning failure.

Step 5 — Document and solicit consistently

The solicitation must implement the chosen type (clauses, pricing schedules, evaluation of price/cost). Changing type midstream without amendments and fairness analysis creates integrity problems (Chapter 4 themes).

Matching risk and requirement definition (master table)

Negotiation of type and fee

Contract type is a business term. In competitive procurements, the Government often specifies the type in the solicitation. In negotiated acquisitions, especially sole-source or when the solicitation allows alternative pricing structures, type and fee may be negotiated.

Negotiation themes (CON 3990V)

1. Government opening position: Prefer the type that matches risk and policy (often FFP when suitable).
2. Contractor position: May push cost-type or higher fee to shift risk or increase return.
3. Trade space: Type, fee, incentives, ceilings, data requirements, and surveillance rights move together.
4. Fee is not free money: Fee should reflect complexity, risk, investment, and policy limits—not a reward for accepting a type the facts do not support.
5. Pre-negotiation objectives (link to later chapter): Document target type/fee and minimum acceptable positions before sitting down.

Exam trap: “Type is never negotiable; only unit prices are.” Type can be fixed by solicitation, but in many negotiated settings type and fee are central business issues within legal constraints.

Combining types

A single contract may combine types—for example:

• FFP CLINs for hardware production lots
• CPFF CLIN for concurrent development support
• FFP options for spares
• T&M CLIN for surge repair with a ceiling

Rules of thumb for hybrids

Combining types is a feature when the work is truly heterogeneous; it is a bug when used to disguise the wrong primary type.

Documenting rationale in the acquisition plan and file

FAR Part 7 acquisition planning and Part 16 selection policy both expect the file to answer: Why this type?

Minimum content for a defensible type decision

1. Description of requirement and stability of definition
2. Period of performance and uncertainty over time
3. Market research findings on how industry prices similar work
4. Risk analysis (cost, schedule, technical, administrative)
5. Alternatives considered (e.g., FFP vs CPFF vs T&M) and why rejected
6. Selected type and fee approach
7. Administration plan (COR, cost/fee controls, award-fee process if any)
8. Approvals required by agency procedures for certain types (e.g., T&M determinations, UCA approvals)

Weak: “Contract type: CPFF.”
Strong: “Technical approach for prototype radar signal processing is not stable enough for FFP; market research shows only cost-type bids on analogous efforts; CPFF term form for 12-month level of effort selected; transition to FFP production contemplated after CDR; DCAA audit support coordinated; limitation of costs controls and monthly burn review assigned to COR.”

Exam scenarios — choosing type from facts

Work these as closed-book drills:

Scenario A — Well-defined commercial training

Facts: commercial course delivery, fixed syllabus, fixed number of sessions, competitive market.
Answer lean: FFP.
Trap: CPFF “because student counts might change” without using options/mods for real changes.

Scenario B — Uncertain remediation after discovery

Facts: hazardous materials found; extent of cleanup unknown; urgency to start characterization.
Answer lean: Possibly T&M or cost-type for characterization phase; letter contract if immediate start required; plan to definitize or recompete defined remediation as FFP when scope clarifies.
Trap: Single long-term FFP with no knowledge of quantity of work—or perpetual T&M with no ceiling.

Scenario C — Production with cost motivation

Facts: mature design, known BOM, Government wants share of underruns.
Answer lean: FPIF (or FFP if incentives unnecessary).
Trap: CPAF with no evaluation capacity; CPFF when uncertainty is low.

Scenario D — Program pressure

Facts: PM says “use cost-plus so we can change requirements without mods.”
Answer lean: Reject as primary rationale. Changes need authority regardless of type; cost-type is for estimating uncertainty, not to avoid configuration control.
Trap: Agreeing that cost-type eliminates need for scope discipline.

Scenario E — IDIQ order

Facts: Multiple-award IDIQ for professional services; this order has a clear 6-month PWS deliverable.
Answer lean: FFP task order if order-level definition supports it; fair opportunity among holders.
Trap: “Parent is cost-type flavor, so every order must be cost-type,” if the instrument allows FFP orders and facts support them.

Common traps (high-yield)

Integration with other FAR parts (exam map)

Closed-book decision checklist

1. Are requirements clear enough to price fixed?
2. Is uncertainty technical/estimating reality or planning laziness?
3. What does market research say firms will bid?
4. Which party should hold cost risk for best mission value?
5. Can we administer the type (fee, hours, costs, EPA)?
6. Is a hybrid CLIN structure justified?
7. Is type/fee a negotiation issue, and are objectives written?
8. Is the rationale in the plan/file?
9. Does the solicitation match the decision?
10. Would this choice survive a protest/audit story about risk and fairness?

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Bottom line: Selecting contract type is a risk-matching and documentation exercise under FAR Part 16, informed by planning and market research. Negotiate type and fee when the acquisition structure allows; combine types only with clear CLIN logic; write down why the choice fits. On CON 3990V, the winning answer pairs the facts to the type—and rejects both cost-type convenience for well-defined work and forced FFP when uncertainty makes fixed pricing unrealistic.