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Contractology Federal Contractor Intelligence

FAR Part 16 — Types of Contracts

FAR Part 16 describes the types of contracts available for government acquisitions, ranging from firm-fixed-price (Subpart 16.2) to cost-reimbursement (Subpart 16.3), incentive contracts (Subpart 16.4), and indefinite-delivery contracts including IDIQs and requirements contracts (Subpart 16.5). Time-and-materials and labor-hour contracts are covered in Subpart 16.6. It prescribes the conditions for use of each type and the determination and findings (D&F) requirements.

Why Part 16 Matters

Contract type determines the allocation of cost risk between the government and contractor. FFP contracts place maximum risk on the contractor, while cost-reimbursement contracts shift risk to the government. IDIQ contracts under Subpart 16.5 are the dominant vehicle for large service acquisitions and carry specific fair opportunity and minimum guarantee requirements. Selecting the wrong contract type can lead to cost overruns, disputes, and audit findings.

Key Topics in Part 16

FAR Part 16 addresses several critical areas of the federal acquisition process. Understanding these topics is essential for both contracting officers and contractors working within this regulatory framework.

  • Firm-fixed-price contracts (Subpart 16.2)
  • Cost-reimbursement contracts (Subpart 16.3)
  • Incentive contracts — FPIF and CPIF (Subpart 16.4)
  • Indefinite-delivery contracts — IDIQ, requirements, definite-quantity (Subpart 16.5)
  • Time-and-materials and labor-hour contracts (Subpart 16.6)
  • Award-term and award-fee arrangements
  • Contract type selection criteria and risk allocation
  • Letter contracts and undefinitized contract actions

How FAR Part 16 Applies

The Federal Acquisition Regulation is organized into 53 parts, each covering a distinct area of the procurement process. Part 16 (Types of Contracts) is part of this framework and works in conjunction with other FAR parts to create a comprehensive regulatory structure. Contracting officers must comply with all applicable parts when executing procurement actions, and contractors must understand the requirements that flow from these regulations into their contracts.

The requirements in Part 16 may be implemented through specific contract clauses prescribed in FAR Part 52. When a clause references Part 16, the substantive requirements originate here, while Part 52 provides the actual clause language incorporated into contracts and solicitations.

Agency supplements: Individual federal agencies may supplement FAR Part 16 with additional requirements. The most common supplements include the Defense Federal Acquisition Regulation Supplement (DFARS), General Services Administration Acquisition Manual (GSAM), and NASA FAR Supplement (NFS). Always check applicable agency supplements when working on specific procurements.

Subparts

FAR Part 16 is divided into 7 subparts, each addressing a specific aspect of types of contracts.

  • 16.1 — Selecting Contract Types
  • 16.2 — Fixed-Price Contracts
  • 16.3 — Cost-Reimbursement Contracts
  • 16.4 — Incentive Contracts
  • 16.5 — Indefinite-Delivery Contracts
  • 16.6 — Time-and-Materials, Labor-Hour, and Letter Contracts
  • 16.7 — Agreements

Reading FAR Part 16

The full text of FAR Part 16 is available on the Electronic Code of Federal Regulations (eCFR). The eCFR provides the most current version of the regulation, including any recent amendments published through Federal Acquisition Circulars (FACs). For historical versions, use the eCFR's point-in-time search feature.

  • What does FAR Part 16 cover?

    FAR Part 16 covers types of contracts within the federal acquisition process. FAR Part 16 describes the types of contracts available for government acquisitions, ranging from firm-fixed-price (Subpart 16.2) to cost-reimbursement (Subpart 16.3), incentive contracts (Subpart 16.4), and indefinite-delivery contracts including IDIQs and requirements contracts (Subpart 16.5). Time-and-materials and labor-hour contracts are covered in Subpart 16.6. It prescribes the conditions for use of each type and the determination and findings (D&F) requirements.

  • Who must comply with FAR Part 16?

    FAR Part 16 applies to all executive branch agencies conducting acquisitions, unless a specific exemption exists. Contractors must comply with the requirements that are incorporated into their contracts through prescribed clauses from FAR Part 52. Agency-specific supplements (DFARS, GSAM, etc.) may add additional requirements beyond the base FAR.

  • Where can I read the full text of FAR Part 16?

    The full text is available on the Electronic Code of Federal Regulations (eCFR). You can also access it through acquisition.gov, which is maintained by the General Services Administration. Both sources reflect the most current version of the regulation.

  • How does FAR Part 16 relate to contract clauses?

    FAR Part 16 establishes the substantive policies and procedures. The actual clause language that gets incorporated into contracts is found in FAR Part 52. Each clause in Part 52 includes a "prescription" that references the relevant policy part, creating a direct link between the requirement and its implementation in the contract.

Adjacent Parts

Part 15 — Contracting by NegotiationPart 17 — Special Contracting MethodsAll FAR PartsFAR Clause LookupPart 7 — Acquisition PlanningPart 12 — Acquisition of Commercial Products and Commercial ServicesPart 14 — Sealed BiddingPart 15 — Contracting by NegotiationPart 32 — Contract FinancingPart 37 — Service ContractingPart 52 — Solicitation Provisions and Contract Clauses

Data sourced from eCFR . Federal contracting data is public domain.