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5 Types Of Government Contracts You Can Acquire As a Federal Contractor
Jul 14, 2022

5 Types Of Government Contracts You Can Acquire As a Federal Contractor

Every year the government of the United States offers billions of dollars to federal contractors. These government contracts are highly lucrative so that is why numerous contractors try to do business in the federal market. However, getting into government contracting is quite confusing due to its complex process.

There are several types of developmental programs of the government. The government also has several types of contracts. Each federal contract requires a unique approach for bidding and performing in the federal market. Understanding the distinct opportunities and challenges of each government contract is important for every federal contractor or commercial business.

If you are planning to acquire government contracts then you must know all the types of government contracts list. These contracts can be acquired not only by large and established entities but also by small and new businesses.

There are mainly 5 types of government contracts that federal contractors can acquire. By understanding each of these contracts, you will be able to figure out the best-suited contract for your business. So wait no more and learn about different US government contracting opportunities and determine which government contracts to bid on.

The 5 Types Of Government Contracts

In this section of this blog, we have given the government contract list that contains government contracts to bid on. As we have already mentioned that there are 5 types of government contracts, so these are:

  • The fixed-price contract
  • Cost-Reimbursement Contracts
  • Time & Materials Contracts
  • Incentive Contracts
  • Indefinite Delivery & Quantity Contracts

Now it is time to go through all these government contracting opportunities.

The Fixed-Price Contract

The government uses the fixed-price contract when the agencies can clearly give their required product quantity or service for a certain period. In this type of contract, the government keeps a specific budget for a project. The federal contractors perform and complete projects that fall within a particular budget. The federal contractors or commercial companies get complete control in making profits from the project. In some cases, the government allows price adjustments in a fixed-price contract. Although the government set a ceiling value in turn. The government makes these adjustments in price depending on different types of factors. The federal contractors also get incentives from the government of the United States.

Usually, a Firm Fixed-Price government contract does not allow any space for negotiation regarding contract price. The federal contractors get two types of incentives from the contracting officer and these are, award-fee incentives and performance/delivery incentives.

The contract value is not amenable to changes with the Firm Fixed-Price Contract. If you are confident that you can price your products and services right then only you should commit to Firm Fixed-Price government contracts. Cost overruns and price underestimation will be shouldered by you as a federal contractor. Also, you have the control to make profits from the budget of the project or we can say contract which is a positive side.

By various economic factors, specific government contracts can be significantly affected so the federal government allows upward and downward value adjustment in fixed-price contracts with economic adjustment contracts. When the market is volatile the government usually uses this type of contract to predict if the contract value is justifiable or not.

There are three types of fixed-price with economic price adjustment contracts. These are, adjustments based on established price, adjustments based on cost of labor or material, and adjustments based on cost indexes of labor and material.

Cost-Reimbursement Contract

A cost recovery contract is a type of contract in which the federal government reimburses costs incurred by a government contractor as long as the value is within the specified maximum price. Contractors carry the risk of cost overrun, but federal contractors must first notify the contracting officer at first. When the project’s circumstances do not meet the requirements for a fixed-type contract the federal government usually awards this type of contract.

A cost contract is a type of contract which is usually awarded to research and development projects conducted by non-profit organizations and non-profit educational institutes. The government contractors will be reimbursed for the allowable cost incurred but they will not receive a fee with cost contracts.

A cost-sharing contract means that a government contractor is willing to bear part of the total cost of a government project with a federal agency. Instead, the contractor will expect substantial compensation benefits other than any sort of financial gain. The cost-sharing contracts are also common with research and development contracts. Once the contract is fulfilled federal agencies and government contractors will reap the rewards.

The government can also give an award fee to motivate government contractors to achieve excellence in performing their services for the federal contract.

The government can also give an award fee to motivate government contractors to achieve excellence in performing their services for the federal contract.

Cost-Plus-Fixed-Fee is used for preliminary exploration and research government projects where the actual cost may be too vague to be determined initially. Depending on the level of work required to execute the project, the federal government will also pay a fixed fee that can be adjusted.

Incentive Contract

The government rewards federal contractors with additional financial compensation to recognize their performance and motivate them to do better in incentive contracts. The two general incentive contracts are fixed-price incentive contracts and cost-reimbursement incentive contracts of the U.S. government.

When the value of the products and services is certain, fixed-price incentive contracts are preferred by the government. Cost-reimbursement incentive contracts are used if the conditions to award fixed-price incentive contracts are not met.

Time & Material Contract

When the federal government is unable to give an accurate estimate of the amount of product and the level of work that they will need, the government prefers time and material contracts instead of fixed-price contracts.

The government negotiates with the government contractors for reasonable specified fixed hourly rates and actual material costs. These types of contracts are only for short-term periods.

The time and material contract has another variation known as the labor-hour contract. The only difference between the previous government contract types is that the federal contractors are bound by this contract.

A letter contract is a preliminary contract that proves that the government authorizes the federal contractor to manufacture materials or perform services required instantly.

Indefinite Delivery, Indefinite Quantity Contracts

Indefinite Delivery, Indefinite Quantity Contracts are also known as IDIQ contracts in short. These IDIQ contracts of the government are commonly used for government-wide multiple purchases such as GSA Schedules. When government agencies are unable to determine the number of products they need to procure and the time period contractor has to perform their services for a specific period, IDIQ contracts are used by the government agencies.

Way To Qualify For Federal Contracts As A Prime Contractor

Arrange all the necessary documents before applying for becoming a federal contractor. In order to get US government contracting opportunities have the required documents that are mentioned below:

  • Legal business documents (eg: state and federal tax IDs).
  • 9-digit unique DUNS number.
  • NAICS codes that classify the nature and industry of products and services of your business.
  • Valid banking information to set up your Electronic Funds Transfer.
  • Complete registration at sam.gov.


So now you got to know about all the 5 types of government contracts making a government contract list. We have also mentioned the documents that you should have to become a federal contractor. Now it is your time to opt for becoming a federal contractor and target a suitable government contract that matches your business. So, wait no more and grab the US government contracting opportunities as a federal contractor.