Part 5116 - Types of Contracts

(Revised 14 July 2022)

Subpart 5116.1 - Selecting Contract Types

5116.102-90 Policies.

5116.103 Negotiating contract type.

Subpart 5116.2 - Fixed-Price Contracts

5116.203 Fixed-price contracts with economic price adjustment.

5116.203-4 Contract clauses.

Subpart 5116.3 - Cost-Reimbursement Contracts

5116.301 General.

5116.301-3 Limitations.

5116.306 Cost-plus-fixed-fee contracts.

Subpart 5116.4 - Incentive Contracts

5116.401 General.

5116.405 Cost-reimbursement incentive contracts.

5116.405-1 Cost-plus-incentive-fee contracts.

5116.405-2 Cost-plus-award-fee contracts.

Subpart 5116.5 - Indefinite-Delivery Contracts

5116.504 - Indefinite Quantity Contracts.

5116.505 Ordering.

5116.505-91 Multiple award task order contracts.

Subpart 5116.6 - Time-and-Materials, Labor-Hour, and Letter Contracts

5116.603 Letter contracts.

5116.603-2 Application.

5116.603-3 Limitations.
Subpart 5116.1 - Selecting Contract Types

5116.102-90 Policies.

Contracting officers must document the rationale for selection of the contract type, to include

consideration of the associated risks, in the contract file. The supporting documentation may be

located in the contract type justification, a separate determination and findings, memorandum for

record, or other appropriate document.

Follow the procedures at AFARS PGI 5116.102-90-1 for selecting contract type.

See AFARS PGI 5116.102-90-2 for guidance on using the Virtual Pricing website.

5116.103 Negotiating contract type.

(c) Contracting officers should actively communicate and coordinate with their requiring activities to

identify opportunities to transition away from cost-reimbursement contracts, when possible and in

the best interest of the Government.

(d)(1) In addition to the items at FAR 16.103(d)(1), discuss how the profit arrangement motivates the

contractor to control costs and meet performance requirements.

Subpart 5116.2 - Fixed-Price Contracts

5116.203 Fixed-price contracts with economic price adjustment.

5116.203-4 Contract clauses.

(d)(2) See 5101.304-90 and APPendix FF for clause approval procedures.

Subpart 5116.3 - Cost-Reimbursement Contracts

5116.301 General.

5116.301-3 Limitations.

(2) The head of the contracting activity shall approve actions as described in DFARS 216.301-3(2).

See Appendix GG for further delegation.
5116.306 Cost-plus-fixed-fee contracts.

(c)(ii) Contracting officers requesting approval to award a contract for non-construction,

environmental work (see DFARS 236.271) must submit their requests to the address at

5101.290(b)(2)(i).

Subpart 5116.4 - Incentive Contracts

5116.401 General.

(d)(i) The head of the contracting activity or designee shall sign the determination and finding. See

Appendix GG for further delegation.

(e)(3)(i) The head of contracting activity shall approve actions as described in FAR 16.401(e)(3)(i).

See Appendix GG for further delegation.

(g) The Assistant Secretary of the Army (Acquisition, Logistics and Technology) shall provide

mechanisms for sharing proven incentive strategies as described in FAR 16.401(g). See Appendix

GG for further delegation.

5116.405 Cost-reimbursement incentive contracts.

5116.405-1 Cost-plus-incentive-fee contracts.

(b)(3) For cost-plus-incentive-fee type contracts, contracting officers shall consider use of a 70/30

share line and a zero minimum fee as the point of departure for establishing the incentive

arrangement during negotiations.

5116.405-2 Cost-plus-award-fee contracts.

(2)(A) In accordance with DFARS PGI 216.405-2(2), a contractor begins each evaluation period with

zero percent of the available award fee due and works to earn the evaluated fee for each evaluation

period. Contractors do not begin with 100% of the available award-fee and have deductions

withdrawn to arrive at the evaluated fee for each evaluation period. In addition, contractors should

not receive award fee above the base fee for simply meeting contract requirements. Earning an

award fee is in accordance with the award fee plan, and should be directly commensurate with the

level of performance under the contract. A contractor should not receive the maximum amount of

award fee under a contract without a demonstrated superior level of performance, as provided for in

the award-fee plan. Maximum contract fee is the sum of all fees (i.e., not just the award fee) and

incentives payable under the contract, including performance and subcontracting incentives.

(B) When an Award-Fee Evaluation Board (AFEB) is used, the senior contracting official (SCO) or

authorized contracting officer will appoint an award-fee determining official (AFDO) in writing,

unless the SCO is the AFDO. The AFDO will then appoint the AFEB and its chairperson in writing.

Such appointment letters will clearly outline the responsibilities and limitations of the AFEB and its
chairperson. AFEB membership should consist of those contracting and acquisition management

personnel, including contract administration personnel, most knowledgeable of the requirements

and contractor performance in the areas evaluated. For contracts in support of major systems, the

AFDO will coordinate the selection of technical AFEB members with the program executive officer

or other management official responsible for technical requirements prior to their appointment. The

AFEB chairperson is responsible for ensuring sufficient training of all AFEB evaluators. AFDOs and

AFEBs will document the rationale for their decision(s) in sufficient detail to demonstrate the

integrity of the award-fee determination process in the contract file. The AFDO may alter the AFEB’s

recommended award fee.

Subpart 5116.5 - Indefinite-Delivery Contracts

5116.504 - Indefinite Quantity Contracts.

(a)(1) The contracting officer shall ensure an order that fulfills the minimum quantity of supplies or

services is issued at the time of contract award.

(c)(1)(ii)(D)(1) The senior procurement executive shall approve actions as stated in DFARS

216.504(c)(1)(ii)(D)(1). See Appendix GG for further delegation.

5116.505 Ordering.

(b)(2)(ii)(C)(3) The head of the contracting activity shall approve actions as stated in FAR

16.505(b)(2)(ii)(C)(3). See Appendix GG for further delegation.

(b)(8) The Assistant Secretary of the Army (Acquisition, Logistics and Technology) shall designate a

task and delivery order ombudsman for the contracting activity. The ombudsman shall be a senior

official, who is independent of the contracting officer and may be the command advocate for

competition. The ombudsman shall be responsible for reviewing complaints from the contractors

under multiple award task or delivery order contracts and ensuring they receive a fair opportunity

for consideration, consistent with the procedures in the contract. See Appendix GG for further

delegation.

5116.505-91 Multiple award task order contracts.

Contracting officers will document all critical task order decisions, such as exceptions to the fair

opportunity process described at FAR 16.505(b)(2) or the selection of a higher priced proposal

because of its greater technical merit, in sufficient detail to justify the decision.

Subpart 5116.6 - Time-and-Materials, Labor-Hour, and

Letter Contracts
5116.603 Letter contracts.

5116.603-2 Application.

(c)(3) The head of the contracting activity shall perform the duties as described in FAR

16.603-2(c)(3). See Appendix GG for further delegation.

5116.603-3 Limitations.

The head of the contracting activity shall make the determination stated in FAR 16.603-3. See

Appendix GG for further delegation.