Proposed Rule2026-19160
Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 16, 17, and 35
Primary source
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Published
September 18, 2026
Issuing agencies
Management and Budget OfficeFederal Procurement Policy OfficeDefense DepartmentGeneral Services AdministrationNational Aeronautics and Space Administration
Abstract
OFPP, DoD, GSA, and NASA (collectively referred to as the Federal Acquisition Regulatory Council or FAR Council) are proposing to amend the Federal Acquisition Regulation (FAR) to implement Executive Order (E.O.) 14275, Restoring Common Sense to Federal Procurement. The E.O. directs the elimination of excessive acquisition regulations to stop the inefficient use of American taxpayer dollars. The FAR Council is issuing twelve proposed rules that collectively, if finalized, would streamline the FAR in its entirety. This rule proposes revisions to FAR part 16, Types of Contracts, part 17, Special Contracting Methods, part 35, Research and Development Contracting, and part 52, Solicitation Provisions and Contract Clauses.
Full Text
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[Federal Register Volume 91, Number 180 (Friday, September 18, 2026)]
[Proposed Rules]
[Pages 59476-59531]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19160]
[[Page 59475]]
Vol. 91
Friday,
No. 180
September 18, 2026
Part V
Office of Management and Budget
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Office of Federal Procurement Policy
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Department of Defense
General Services Administration
National Aeronautics and Space Administration
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48 CFR Parts 6, 7, 35 et al.
Federal Acquisition Regulation: Revolutionary Federal Acquisition
Regulation Overhaul Parts 16, 17, and 35; Proposed Rule
Federal Register / Vol. 91, No. 180 / Friday, September 18, 2026 /
Proposed Rules
[[Page 59476]]
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OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 16, 17, 35, and 52
[FAR Case 2026-006, Docket No. FAR-2026-0006, Sequence No. 1]
RIN 9000-AO91
Federal Acquisition Regulation: Revolutionary Federal Acquisition
Regulation Overhaul Parts 16, 17, and 35
AGENCY: Office of Federal Procurement Policy (OFPP), Office of
Management and Budget (OMB); Department of Defense (DoD); General
Services Administration (GSA); and National Aeronautics and Space
Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: OFPP, DoD, GSA, and NASA (collectively referred to as the
Federal Acquisition Regulatory Council or FAR Council) are proposing to
amend the Federal Acquisition Regulation (FAR) to implement Executive
Order (E.O.) 14275, Restoring Common Sense to Federal Procurement. The
E.O. directs the elimination of excessive acquisition regulations to
stop the inefficient use of American taxpayer dollars. The FAR Council
is issuing twelve proposed rules that collectively, if finalized, would
streamline the FAR in its entirety. This rule proposes revisions to FAR
part 16, Types of Contracts, part 17, Special Contracting Methods, part
35, Research and Development Contracting, and part 52, Solicitation
Provisions and Contract Clauses.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat Division at the address shown below on or before
October 19, 2026, to be considered in the formation of the final rule.
ADDRESSES: Submit comments in response to FAR Case 2026-006 to the
Federal eRulemaking portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the
instructions for sending comments.
Instructions: Please submit comments only and cite ``FAR Case 2026-
006'' in all correspondence related to this case. Include your name,
company name (if any), and ``FAR Case 2026-006'' on any attached
document. Comments received generally will be posted without change to
<a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal and/or business
confidential information provided. Public comments may be submitted as
an individual, as an organization, or anonymously (see frequently asked
questions at <a href="https://www.regulations.gov/faq">https://www.regulations.gov/faq</a>). To confirm receipt of
your comment(s), please check <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
approximately two to three days after submission to verify posting.
Docket: For access to the docket to read background documents or
comments received, go to <a href="https://www.regulations.gov/FAR-2026-0006">https://www.regulations.gov/FAR-2026-0006</a>.
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
<a href="/cdn-cgi/l/email-protection#f6b0b7a486999a9f958fb6918597d8919980"><span class="__cf_email__" data-cfemail="a7e1e6f5d7c8cbcec4dee7c0d4c689c0c8d1">[email protected]</span></a> or call 202-969-4075 and cite ``FAR Case 2026-006.''
For information pertaining to status, publication schedules, or
alternate instructions for submitting comments if <a href="https://www.regulations.gov">https://www.regulations.gov</a> cannot be used, contact the Regulatory Secretariat
Division at 202-501-4755 or <a href="/cdn-cgi/l/email-protection#480f1b091a2d2f1b2d2b082f3b29662f273e"><span class="__cf_email__" data-cfemail="cf889c8e9daaa89caaac8fa8bcaee1a8a0b9">[email protected]</span></a>. Please cite ``FAR Case
2026-006.''
SUPPLEMENTARY INFORMATION:
I. Background
E.O. 14275, Restoring Common Sense to Federal Procurement (April
15, 2025), resets the foundation for Federal buying by requiring the
FAR Council to produce a streamlined FAR that is simpler, clearer, and
structured for speed. According to the E.O., the FAR has evolved from
its original purpose (i.e., to establish uniform procedures across
executive departments and agencies), into an excessive and
overcomplicated regulatory framework and bureaucracy. While meant to
``deliver, on a timely basis, the best value product or service to the
customer, while maintaining the public's trust and fulfilling public
policy objectives,'' the FAR has become an expensive barrier to
achieving those objectives. As a result, the E.O. directed the FAR
Council and OMB to create an agile, effective, and efficient regulation
that contains only provisions required by statute or essential to sound
procurement.
To implement E.O. 14275, OMB issued Memorandum M-25-26, Overhauling
the Federal Acquisition Regulation, which announced the ``Revolutionary
FAR Overhaul'' (RFO) and created a roadmap for producing simpler
regulations aligned to statute, rewritten in plain language, and
including nonstatutory requirements that are necessary to conducting a
sound procurement. The memorandum described a new streamlined vision
for the FAR, to be maintained alongside nonregulatory governmentwide
guidance to provide a common-sense authoritative foundation for nimble
response and delivery of mission capability.
This new vision represents a paradigm shift where over-engineered
regulations designed for paperwork and compliance are replaced with
streamlined regulations focused on core stewardship principles and
nonregulatory guidance that will be used in concert with the
streamlined FAR focused on proven buying strategies, critical thinking,
market awareness (including to expand awareness of goods, products, and
materials offered in the United States), and risk literacy to enhance
workforce problem-solving. The significant reduction of unnecessary
mandates is intended to clarify and reinforce the contracting officer's
discretion to determine the best way to apply policies and practices.
The newly established, nonregulatory guidance, which has been inspired
by acquisition innovation advocates, category managers, other
experienced practitioners, and many years of feedback from the
contractor community--is expected to facilitate contracting officers'
use of their discretion more efficiently and effectively to make
smarter buying decisions.
OMB Memorandum M-25-26 also directed the FAR Council to complete
the regulatory overhaul in two phases, each with robust public input.
The FAR Council conducted its phase one effort in fiscal year 2025 by
issuing model class deviations to replace each part in the FAR until
such time as formal rulemaking occurred. This proposed rule is one of a
series that constitute the FAR Council's phase two effort to obtain
public comment through formal rulemaking.
II. Discussion and Analysis
A summary of proposed changes to existing FAR parts 16, 17, and 35,
and their corresponding provisions and clauses in part 52 follows:
A. General
1. General RFO Updates.
This proposed rule generally reorganizes the FAR parts into phases
of acquisition and simplifies the text into plain language, where
possible. The plain language efforts include changes to active voice,
edits to improve readability, and reorganization to present information
more logically. None of the plain language edits are
[[Page 59477]]
intended to change existing FAR requirements. The rewriting of the
entire FAR also required edits to harmonize the changes being proposed
such as updating the cross-references. This aligns with the Federal
plain language guidelines as directed by the Plain Writing Act of 2010
(5 U.S.C. 301 note).
2. Standardization of prescriptions.
This rule proposes revisions to standardize prescriptions for
provisions and clauses. These changes are intended to provide better
clarity around the applicability of provisions and clauses such as
whether they apply to commercial products and services.
3. Use of ``must'' instead of ``shall''.
Additional revisions are being proposed throughout the FAR text and
FAR provisions and clauses to replace the use of the term ``shall''
with ``must'' or ``will,'' as appropriate, to impose requirements.
4. Non-statutory requirements.
Section 4 of the E.O. required amendments to the FAR to ensure it
contains only provisions that are required by statute or that are
otherwise necessary to support simplicity and usability, strengthen the
efficacy of the procurement system, or protect economic or national
security. The FAR Council reviewed all non-statutory requirements to
determine if they are still relevant and essential to sound procurement
in today's contracting environment based on the criteria from section 4
of the E.O. The proposed rule retains non-statutory requirements that
further one or more of the elements of sound procurements, including
those requirements that serve as guardrails to protecting taxpayer
interests and promote taxpayer confidence in the procurement system.
Non-statutory requirements that were beneficial but not essential were
retained in the non-regulatory guidance documents. Other non-statutory
requirements that did not meet these standards, were removed. The
Council considered the extent to which regulation is the most efficient
means for capturing the benefit of the policy. For example, most ``how
to'' requirements were found to be more appropriately suited for non-
regulatory coverage which better enables a contracting officer to use
discretion in determining the application of a strategy to a given
situation and limits the risk of overapplication, which can create
wasteful burden on the contracting parties.
As part of the RFO, the FAR Council has created a number of non-
regulatory resources, including the FAR Companion, which provides
insight from experienced practitioners across the government on using
more streamlined practices and processes. The migration of significant
coverage to non-regulatory guidance is intended to ensure that the
benefits of the policy are not outweighed by the compliance burden of a
more rigidly written regulation that is prone to application in an
overly broad manner. This approach was explained to the public in a set
of ``frequently asked questions'' that were posted on the Revolutionary
FAR Overhaul homepage shortly after the initiative was launched.
B. FAR Part 16
The proposed rule, if finalized, would revise FAR part 16 to
eliminate excessive acquisition regulations to stop the inefficient use
of American taxpayer dollars through the removal of obsolete and non-
statutory content not essential to sound procurement, and to simplify,
clarify, and streamline the policies and procedures pertaining to
contract types. These revisions would further emphasize the use of
fixed-price contract types. The proposed rule would also reorganize FAR
part 16 to first address contract types, then contract mechanisms
(indefinite-delivery contracts, letter contracts, and agreements), with
subparts updated as follows.
------------------------------------------------------------------------
Existing FAR Reference Proposed FAR Subpart
------------------------------------------------------------------------
16.1 Selecting Contract Types.......... 16.1 Selecting Contract Types.
16.2 Fixed-Price Contracts............. 16.2 Fixed-Price Contracts.
16.3 Cost-Reimbursement Contracts...... 16.3 Cost-Reimbursement
Contracts.
16.4 Incentive Contracts............... 16.4 Incentive Contracts.
16.5 Indefinite-Delivery Contracts..... 16.6 Indefinite-Delivery
Contracts.
16.6 Time-and-Materials, Labor-Hour, 16.5 Time-and-Materials and
and Letter Contracts. Labor-Hour Contracts.
16.603 Letter Contracts................ 16.7 Letter Contracts.
16.7 Agreements........................ 16.8 Agreements.
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The following is a list of substantive changes proposed for FAR
part 16.
1. Shift from Restrictive to Permissive Framework in Contract Type
Selection.
The proposed rule, if finalized, would shift the guiding principles
on contract type selection from a restrictive to a permissive
framework, consistent with 10 U.S.C. 3321 and 41 U.S.C. 3901. This
change would allow agencies to more easily utilize contract types not
explicitly mentioned in the FAR and would allow for better congruence
with commercial practices if the contract type promotes the best
interest of the Government and is not expressly prohibited by statute.
Alternate I to provision 52.216-1, Type of Contract, would provide
offerors the opportunity to propose an alternative contract type.
2. Changes Reflective of E.O. 14402, Promoting Efficiency,
Accountability, and Performance in Federal Contracting.
On April 30, 2026, the President issued E.O. 14402, Promoting
Efficiency, Accountability, and Performance in Federal Contracting.
Section 3(b) of the E.O. directed the Administrator for Federal
Procurement Policy, in coordination with the FAR Council, to propose
amendments to the Federal Acquisition Regulation, consistent with the
policies of the order.
Section 1 of the E.O. states that fixed-price contracts with
performance-based considerations should serve as the default and
preferred method of procurement in order to advance cost predictability
and budget discipline, appropriate contractor incentives and
accountability, and streamlined procurement and contract
administration.
Section 2 of the E.O. requires agencies to justify the use of non-
fixed-price contract types in writing, with the justification signed by
the agency head. The E.O. requires agency head approval of the contract
at various total potential contract value thresholds.
The proposed rule would revise FAR part 16 to adhere to the
preference for fixed-price contracts with performance-based
considerations, and adds justification and approval requirements for
other than fixed-price contracts and firm-fixed-price, level-of-effort
term contracts. New section 16.104 describes the justification and
approval requirements.
3. Consumption-Based Solutions.
The proposed rule includes changes consistent with section 1825 of
the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2026
(Pub.
[[Page 59478]]
L. 119-60) for consistent use across the Federal Government. New
language would include the definition of ``consumption-based
solution,'' and clarification that contracting officers may acquire
consumption-based solutions where supplies and services are capable of
being metered and billed based on actual usage as fixed-price units.
The acquisition of fixed-priced units on a consumption basis would be
considered a firm-fixed price contract. The inclusion of this language
would support the use of consumption-based contracts, a common
commercial practice for a variety of supplies and services, including
but not limited to cloud computing capacity.
4. Delineation Between ``Ordering Period'' and ``Period of
Performance.''
The proposed 16.601-2 would include a clear delineation between
``ordering period'' for task-order contracts and delivery-order
contracts, ``period of performance'' for their orders, and ``effective
period of the contract.'' The clauses at 52.216-21, Requirements, and
52.216-22, Indefinite Quantity, have been edited for clarity given the
delineation of these terms.
5. On-ramps and Off-ramps under Multiple-Award Contracts.
The proposed rule, if finalized, would include policies and
procedures related to ``on-ramping'' (adding new contractors) and
``off-ramping'' (removing contractors) from a multiple-award contract
to maintain a current, competitive, and innovative pool of vendors.
Alternates I and II to provision 52.216-22, Indefinite Quantity, are
proposed to provide for off-ramps with various cancellation policies.
6. Inclusion of Blanket Purchase Agreements (BPAs) under Multiple-
Award Contracts.
The proposed rule would include the policies and procedures to
issue and use BPAs under multiple-award contracts, similar to those
permitted under the Federal Supply Schedules. If finalized, this policy
would allow contracting officers to utilize fair opportunity procedures
to issue BPAs within the scope of the contract if authorized under the
multiple-award contract.
7. Significant Reorganization of Ordering Procedures for Task-Order
Contracts and Delivery-Order Contracts.
The proposed rule would reorganize the postaward ordering placement
into two sections: 16.606, which would be applicable to all task-order
contracts and delivery-order contracts, regardless of the number of
awardees, and 16.607, which would be applicable to multiple-award
contracts only. Section 16.607 would address purchases at or below the
micro-purchase threshold, fair opportunity procedures applicable to all
purchases above the micro-purchase threshold, and specific instructions
for fair opportunity depending on dollar value. The instructions in
16.607 would further emphasize the broad discretion the contracting
officer has in developing appropriate order placement procedures for
the acquisition at hand and encourages utilization of innovative
techniques.
8. Inclusion of FAR Case 2020-005, Explanations to Unsuccessful
Offerors on Certain Orders Under Task-Order Contracts and Delivery-
Order Contracts (88 FR 53855).
The proposed rule would revise the FAR to implement section 874 of
the NDAA for FY 2020 (Pub. L. 116-92) which, for task orders or
delivery orders exceeding the simplified acquisition threshold (SAT)
but not greater than $7.5 million, requires contracting officers to
provide, upon written request from an unsuccessful offeror, a brief
explanation as to why the offeror was unsuccessful, including the
rationale for award and an evaluation of the significant weak or
deficient factors in the offeror's offer.
Section 874 of the NDAA uses the term ``unsuccessful offeror.'' The
proposed FAR 16.607-4 would use the term ``contractor who competed for
the order, but was not awarded the order.'' Both terms are synonymous;
referring to an entity who has been awarded a basic contract but has
been unsuccessful for the award of an order competed under the basic
contract.
The proposed rule would require contracting officers to notify all
contractors who competed for the order, but were not awarded the order,
when the total price of a task order or delivery order exceeds $7.5
million. If the $7.5 million threshold is met or exceeded, contracting
officers would be directed to the procedures at FAR part 15 when
providing a postaward notification or postaward debriefing,
respectively.
The FAR threshold at 16.505 (included in the proposed rule at
16.607-4 and 16.607-5) is currently $7.5 million as a result of three
inflation adjustments in accordance with FAR 1.109. FAR Case 2014-022
published on July 2, 2015, at 80 FR 38293, which raised the threshold
from $5 million to $5.5 million; 2019-013 published on October 2, 2020,
at 85 FR 62485, which raised the threshold to $6 million; and FAR Case
2024-001 published on August 27, 2025, at 90 FR 41872, which raised the
threshold to $7.5 million.
The proposed rule would implement the requirement for contracting
officers to, upon written request from an unsuccessful awardee, provide
a brief explanation as to why the awardee was unsuccessful for a task
order or delivery order exceeding the SAT but not exceeding $7.5
million. While the statutory threshold is $5.5 million, the proposed
rule would impose these brief explanation requirements at the higher
$7.5 million threshold to align with the current threshold. This would
avoid a gap between $5.5 million and $7.5 million. This new brief
explanation requirement for orders above the SAT and below $7.5 million
would not provide a debriefing at the level of detail currently
afforded to unsuccessful awardees over $7.5 million, however, this
information is expected to benefit entities by improving future offers.
While not expressly required by the statute, the proposed rule would
add a postaward notification requirement for the applicable task orders
and delivery orders to ensure unsuccessful awardees are provided an
opportunity to obtain the brief explanation as to why the awardee was
unsuccessful in a timely manner.
9. Streamlining of 52.216-7, Allowable Cost and Payment.
The proposed rule would remove a number of items required for an
adequate indirect cost proposal in clause 52.216-7, Allowable Cost and
Payment, paragraph (d)(2)(iii).
Paragraph (j), Subcontract Information, would be limited to only
those subcontracts with a value exceeding the threshold for requiring
certified cost or pricing data as prescribed in FAR 15.403-3.
The detailed information previously required by paragraph (k) for
time-and-materials and labor-hour contracts such as labor rates, labor
hours, and other detailed costs elements would be removed. The summary
level information previously required by paragraph (k) would be
relocated to paragraph (h).
Paragraph (l), which required submission of reconciliation of total
payroll per IRS form 941 to total labor costs distribution, would be
removed in its entirety.
The information previously required by paragraph (o) for contracts
physically completed in this fiscal year would be relocated to
paragraph (h) and is limited to level-of-effort information, contract
ceiling amount, and an indication of whether the contract is ready to
close. Contract fee computations would no longer required.
The removal of these items would reduce the amount of information
required from contractors for an incurred cost audit submission and
would therefore reduce the time
[[Page 59479]]
required for contract closeout and impact settlement agreements.
10. Clarification on Applicability of 52.216-7, Allowable Cost and
Payment, to Cost-Type Incentive Contracts.
FAR paragraph 16.305(a), clause 52.216-16, Incentive Price
Revision-Firm Target, and clause 52.216-17, Incentive Price Revision-
Successive Targets, would be altered to clarify applicability of
52.216-7, Allowable Cost and Payment, to cost-type incentive contracts,
including fixed-price cost incentive contracts.
Fixed-price cost incentive contracts are hybrid contracts that use
actual costs, including indirect costs, to negotiate a final incentive
payment. FAR 42.503-1(c)(2) and FAR 31.103(b)(3) would require the use
of established final indirect cost rates (FICR) to calculate costs in
fixed-price cost incentive contracts in order to comply with 10 U.S.C.
3743(a) and 41 U.S.C. 4303(a). This change would erase ambiguity in the
applicability of FAR clause 52.216-7, which includes the process to
calculate FICR.
FAR clauses 52.216-16 and 52.216-17 currently acknowledge that
``costs'' mean ``allowable costs'' in accordance with the cost
principles in FAR Part 31. The proposed rule adds language clarifying
that FICR should be used for calculating incurred costs and, if the
contractor does not already have a contract which establishes FICR,
they should follow the process in paragraph (d) of the allowable cost
and payment clause to establish FICR.
C. FAR Part 17
The proposed rule would revise FAR part 17 to eliminate excessive
acquisition regulations to stop the inefficient use of American
taxpayer dollars through the removal of obsolete and non-statutory
content not essential to sound procurement, and to simplify, clarify,
and streamline the policies and procedures pertaining to special
contracting methods. Subparts would be rearranged to remove reserved
subparts and ensure similar content is placed together.
------------------------------------------------------------------------
Existing FAR reference Proposed FAR subpart
------------------------------------------------------------------------
17.1 Multiyear Contracting............. 17.1 Multiyear Contracting.
17.2 Options........................... 17.2 Options.
17.3 [Reserved]........................ N/A.
17.4 Leader Company Contracting........ 17.3 Leader Company
Contracting.
17.5 Interagency Acquisitions.......... 17.4 Interagency Acquisitions.
17.6 Management and Operating Contracts 17.6 Management and Operating
Contracts.
17.7 Interagency Acquisitions: 17.5 Interagency Acquisitions:
Acquisitions by Nondefense Agencies on Acquisitions by Nondefense
Behalf of the Department of Defense. Agencies on Behalf of the
Department of Defense.
17.8 Reverse Auctions.................. 17.7 Reverse Auctions.
------------------------------------------------------------------------
The following substantive changes are proposed to FAR part 17.
1. Clarification on Multiyear Contracts for Supplies and Services
for DoD, NASA, and the Coast Guard.
The proposed rule would include language reflective of the
limitations on the use of multiyear contracts for supplies and services
by DoD, NASA, and the Coast Guard in accordance with 10 U.S.C. 3501 and
10 U.S.C. 3531 in 17.103-1.
2. Removal of General Five-Year Limitation on Contract Duration.
The proposed rule would replace the non-statutory five-year
limitation on contract duration for all contracts previously included
at 17.204(e) with a requirement to ``follow any statutory or regulatory
limits on contract duration.'' An example of such a statutory
limitation is the five-year limit on initial ordering periods, and ten-
year limit on total potential ordering period, for indefinite-delivery
contracts given in 10 U.S.C. 3403.
3. Modernize Option for Increased Quantity Clauses to Apply to Both
Services and Supplies.
The proposed rule would remove limitations on the use of clause
52.217-6, Option for Increased Quantity, and clause 52.217-7, Option
for Increased Quantity--Separately Priced Line Item, in solicitations
and contracts for the purchases of services. As currently written, the
FAR prescribes the provisions and clauses contracting officers use when
including options in solicitations and contracts, but lacks a FAR
clause for use when contracting officers identify a potential need for
additional quantities of services during a contract's performance
period. An example of such a need is when a program office has a bona
fide need for a definite quantity of services but identifies
circumstances where an increase in the demand for those services may
reasonably occur.
While FAR subpart 17.2, as currently codified, permits the use of
options for increased quantities of services, the FAR lacks any
corresponding clause for doing so. The limiting language included in
these prescriptions have prevented many agencies from adequately
utilizing 52.217-6 and 52.217-7, or forced increased acquisition time
and costs associated with seeking a deviation or drafting of
acquisition-unique clause.
The proposed rule would provide contracting officers with a
corresponding policy to allow the use of FAR clause 52.217-6 and
52.217-7 when procuring additional requirements during a contract's
performance period. The inclusion of such a clause during initial
competition of the contract would allow for the prices included for
such surge requirements to be determined on the basis of competition,
rather than negotiated as a sole-source modification during contract
administration. The cost and lead time associated with exercising an
option for increased quantity is less than that of issuing a sole-
source modification or engaging in a competition for a new award of the
same items.
4. Modernize Option To Extend Services to Apply to Services and
Supplies.
The proposed rule would allow for the use of clause 52.217-8,
Option to Extend Services, renamed Option to Extend, in task-order
contracts and delivery-order contracts for requirements other than
services. This clause allows for the Government to continue to utilize
an existing contract for up to six months at the current rate.
The clause was previously prescribed for use in solicitations and
contracts ``for services when the inclusion of an option is
appropriate.'' FAR subpart 17.2, as currently codified, permits the use
of options for extensions of contract duration.
The limiting language included in the codified prescription has
prevented many agencies from adequately utilizing 52.217-8, or forced
increased acquisition time and costs associated with seeking a
deviation or drafting of acquisition-unique clause.
Allowing use of this clause for an indefinite delivery contract for
critical supplies, for example, would provide
[[Page 59480]]
for the provision of supplies without interruption in the case of a
delay in a follow-on award due to protest or other reasons. The
transaction cost associated with the extension of a contract utilizing
52.217-8 is less than that of issuing a competitive or sole-source
bridge contract.
The proposed rule updates this clause and prescribes it for use in
solicitations and contracts ``when adding an option to extend the
period of performance for services, ordering period for any
requirement, or both to ensure continuity of services for up to six
months is appropriate.'' Limiting the use of this clause to services
for periods of performance, specifically, is appropriate to prevent the
inadvertent use of the clause in increasing the end date of a supply
contract.
5. Add Language on Handling of Expiring Contracts During a Lapse in
Appropriations.
The proposed rule would include a new paragraph in clauses 52.217-
8, Option to Extend Services, renamed Option to Extend, and 52.217-9,
Option to Extend the Term of Contract, to allow for the Government and
contractor to mutually agree to toll or delay the option exercise time
period, such as 30 days after the resumption of Government operations,
in the event the period to exercise the option ends during a lapse in
appropriations.
The addition of this paragraph would allow for a more expedient
return to operations and allow for reduced transaction costs as a
result of a Government shutdown.
6. Removal of Best Interest Determination Requirement Under Economy
Act Interagency Acquisitions.
Section 875 of the John S. McCain NDAA for FY 2019 (Pub. L. 115-
232), entitled ``Promotion of the Use of Government-Wide and Other
Interagency Contracts'', removed the requirement to include in the FAR
a determination that ``an interagency acquisition is the best
procurement alternative.'' The proposed rule would remove this
requirement from the FAR.
7. Changes to Management and Operating Contracts.
The proposed rule would remove language regarding competition and
reviews of contractor performance for Management and Operating
contracts. Removal of this non-statutory language would reduce
confusion and emphasizes the use of competition in accordance with the
Competition in Contracting Act of 1984.
8. Incorporation of FAR Case 2023-003, Prohibition on the Use of
Reverse Auctions for Complex, Specialized, or Substantial Design and
Construction Services (89 FR 70157).
The proposed rule would amend the FAR to implement section 2 of the
Construction Consensus Procurement Improvement Act of 2021 (Pub. L.
117-28). Section 2 of the Construction Consensus Procurement
Improvement Act of 2021 amended section 402 of Title IV of Division U
of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) entitled
the Construction Consensus Procurement Improvement Act of 2020 to
require rulemaking to promulgate a definition of ``complex,
specialized, or substantial design and construction services'', which
includes site planning and design; architectural and engineering
services (as defined in 40 U.S.C. 1102); interior design; performance
of substantial construction work for facility, infrastructure, and
environmental restoration projects; and construction or substantial
alteration of public buildings or public works. The statute prohibits
the use of reverse auctions for such services having a value that
exceeds the simplified acquisition threshold (SAT). This change is
reflected in new definitions, a revised applicability section, and in
clauses 52.217-10, 52.217-11, and 52.217-12.
The proposed rule would establish a new definition in FAR subpart
17.8 for ``complex, specialized, or substantial design and construction
services'' that reflects the statutory definition to support its use at
FAR subpart 17.8 and in FAR part 36. In addition, the definition of
``reverse auction'' in FAR 2.101 would be revised to better reflect the
statutory definition provided in the Construction Consensus Procurement
Improvement Act of 2021 (see FAR case 2026-001, Revolutionary FAR
Overhaul Parts 1, 2, 4, 33, 39, 40 and 53).
While the statute does not prohibit the use of reverse auctions for
the subject services at or below the SAT, a reverse auction may only be
used if market research indicates it is appropriate (see FAR 17.702-
1(a)) and not prohibited by regulation or statute (see FAR 17.702-2,
and FAR part 36).
The FAR identifies two types of procurements for which reverse
auctions may not be used, regardless of dollar value:
a. Procurements for the design and construction of a public
building, facility or work using the two-phase design-build
selection procedures authorized by 10 U.S.C. 3241 and 41 U.S.C.
3309, as implemented at FAR part 36, may not be conducted using a
reverse auction.
b. Procurements for architectural and engineering services
subject to 40 U.S.C. chapter 11, commonly known as the Brooks
Architect Engineer Act, may not be awarded using reverse auctions
because reverse auctions do not comply with the qualifications-based
selection processes required by statute and implemented at FAR part
36.
D. FAR Part 35
The proposed rule would revise FAR part 35 to eliminate excessive
acquisition regulations to stop the inefficient use of American
taxpayer dollars through the removal of obsolete and non-statutory
content not essential to sound procurement, and to simplify, clarify,
and streamline the policies and procedures pertaining to research and
development contracting. Several areas within existing FAR part 35 were
extraneous or were addressed in multiple locations across the existing
FAR, and therefore are proposed for removal. The following substantive
changes are proposed to FAR part 35.
1. Clarity on Scope of Research and Development.
The proposed rule would include clarifying language on the purpose
of research and development previously included in the FAR and
information on the delivery of initial or additional items created as a
result of such research and development.
2. Clarity on Use of Grants, Cooperative Agreements, and Other
Transaction Authorities.
The proposed rule would include clarifying language on the types of
agreements that may be issued in response to the selection of a
proposal resulting from a research and development solicitation or
Broad Agency Announcement. While the use of grants, cooperative
agreements, and other transaction authority are not regulated by the
FAR, a variety of solicitation types that may lead to such an agreement
are regulated by the FAR (e.g., Broad Agency Announcements). Therefore,
for the ease of decision of award medium for the contracting officer
overseeing such a solicitation, the description of such agreements
would be appropriate in the FAR.
3. Removing Preference for ``Well-Established'' Entities and
Ambiguity with Publicizing Requirements in Part 5.
The proposed rule would remove language regarding providing
solicitations to ``only a reasonable number of responsible sources''
and the requirement for agencies to ``continually search for and
develop information on sources competent to perform R&D work.'' The
preference for ``well-established'' entities conflicts with the full
and open competition requirements of FAR part 6 and the solicitation
[[Page 59481]]
publicizing requirements in FAR parts 5 and 35. Continually searching
for potential R&D sources is in an agency's best interest, and further
incentivized via agency small business goals. Therefore, inclusion in
the FAR is unnecessary.
4. Clarified applicability of FAR part 15.
The proposed rule would clarify that the general research and
development evaluation procedures provided in FAR part 35 may be used
alone, or in conjunction with the Broad Agency Announcement evaluation
procedures at 35.102 or part 15 evaluation procedures. This
clarification would allow contracting officers maximum flexibility
depending on the type and complexity of research and development
desired.
For example, if a Government requirement exists related to
developing a specific system or hardware for a major system, FAR part
15 solicitation and evaluation procedures may be appropriate to use in
tandem with FAR part 35. If a requirement is for basic and applied
research directed toward advancing the state-of-the-art, and varying
technical/scientific approaches are reasonably expected to where no
apples-to-apples comparison is possible, the Broad Agency Announcement
technique provided in 35.102 may be appropriate to use on its own for
flexibility in evaluation and agreement type.
E. FAR Part 52
Discussion and analysis for provisions and clauses updated in this
rule. Provisions and clauses associated with a particular FAR part are
discussed within the relevant FAR part's analysis (e.g., proposed
changes to FAR clause 52.216-7 are addressed at Discussion and Analysis
section II.B.9).
Potential future provision and clause renumbering. As a result of
the RFO, the FAR Council is considering establishing a new subpart in
part 52 and relocating and renumbering all provisions and clauses under
this new subpart. This means, if FAR subpart 52.4 was used, all
provisions and clauses would begin with 52.4 instead of 52.2. The FAR
Council welcomes comments on the potential impact of such a change on
contractors, Government personnel, and other stakeholders.
III. Applicability to Contracts and Subcontracts Valued at or Below the
Simplified Acquisition Threshold and for Commercial Products and
Commercial Services
The following sections address the applicability of provisions and
clauses prescribed in FAR parts 16, 17, and 35 to solicitations and
contracts valued at or below the simplified acquisition threshold (SAT)
and those for the acquisition of commercial products, commercially
available off-the-shelf (COTS) items, and commercial services.
Prescriptions for provisions and clauses in these parts have been
updated to reflect applicability to commercial acquisitions.
This rule proposes to add the following new alternate clauses and
provisions. These alternate clauses and provisions would hold the same
applicability to solicitations and contracts valued at or below the
simplified acquisition threshold (SAT) and those for the acquisition of
commercial products, commercially available off-the-shelf (COTS) items,
and commercial services, as the basic clauses and provisions.
----------------------------------------------------------------------------------------------------------------
Provision or clause No. Name Prescription reference
----------------------------------------------------------------------------------------------------------------
Provision.......................... 52.216-1, Alt. I...... Type of Contract, 16.105.
Alternate I.
Clause............................. 52.216-22, Alt. I..... Indefinite Quantity, 16.605(e)(1).
Alternate I.
Clause............................. 52.216-22, Alt. II.... Indefinite Quantity, 16.605(e)(2).
Alternate II.
----------------------------------------------------------------------------------------------------------------
A. Contracts and Subcontracts Valued at or Below the Simplified
Acquisition Threshold
This proposed rule, if finalized, does not alter the prescriptions
of provisions and clauses included in this proposed rule to change
their applicability to contracts and subcontracts valued at or below
the SAT.
B. Contracts and Subcontracts for Commercial Products, Commercially
Available Off-the-Shelf Items, and Commercial Services
41 U.S.C. 1906 governs the applicability of laws to contracts for
the acquisition of commercial products and commercial services and
gives the FAR Council the authority to determine to apply a law to
contracts or subcontracts for the acquisition of commercial products
and commercial services. 41 U.S.C. 1907 exempts contracts for
commercially available off-the-shelf (COTS) items from certain
provisions of law unless the Administrator for Federal Procurement
Policy determines that doing so would not be in the best interest of
the Federal Government.
Section 839 of the John S. McCain NDAA for FY 2019 (Pub. L. 115-
232) required the FAR Council and the Administrator of Federal
Procurement Policy to review prior determinations under 41 U.S.C. 1906
and 41 U.S.C. 1907, as well as the applicability of provisions and
clauses to contracts and subcontracts for commercial products, COTS
items, and commercial services that do not implement statute or
Executive order, and propose amendments to the FAR to eliminate or
exempt such requirements from commercial acquisitions, unless there are
specific reasons to retain particular requirements.
In accordance with section 839 of the NDAA for FY 2019 and their
authorities under 41 U.S.C. 1906 and 1907, the FAR Council reviewed the
applicability of the provisions and clauses associated with the FAR
parts covered by this proposed rule.
The following table reflects the FAR Council and Administrator of
Federal Procurement Policy's proposed determination regarding the
applicability of the provisions and clauses to solicitations and
contracts for commercial products, COTS items, and/or commercial
services. In making proposed applicability determinations, the FAR
Council considered factors such as whether the provision or clause
advances national security or economic security, contributes to the
resilience of contractors and subcontractors in the federal
marketplace, or advances uniformity and clarity in the performance of
basic functions that are essential to sound procurement.
Accordingly, this proposed rule, if finalized, would revise
provision and clause prescriptions to clearly reflect applicability to
commercial acquisitions as outlined in the table. An ``X'' in the
following table indicates the provision or clause would apply to that
category of commercial acquisition, as prescribed:
[[Page 59482]]
----------------------------------------------------------------------------------------------------------------
Commercial Commercial
Provision/clause No. Title products services COTS items
----------------------------------------------------------------------------------------------------------------
52.216-1............................ Type of Contract................ X X X
52.216-1 Alt I...................... Type of Contract................ X X X
52.216-2............................ Economic Price Adjustment- X X X
Standard Supplies.
52.216-3............................ Economic Price Adjustment- X X X
Semistandard Supplies.
52.216-4............................ Economic Price Adjustment-Labor X X X
and Material.
52.216-5............................ Price Redetermination- ............ ............ ............
Prospective.
52.216-6............................ Price Redetermination- ............ ............ ............
Retroactive.
52.216-7............................ Allowable Cost and Payment...... ............ ............ ............
52.216-7 Alt I...................... Allowable Cost and Payment...... ............ ............ ............
52.216-7 Alt II..................... Allowable Cost and Payment...... ............ ............ ............
52.216-7 Alt III.................... Allowable Cost and Payment...... ............ ............ ............
52.216-7 Alt IV..................... Allowable Cost and Payment...... ............ ............ ............
52.216-8............................ Fixed Fee....................... ............ ............ ............
52.216-9............................ Fixed Fee-Construction.......... ............ ............ ............
52.216-10........................... Incentive Fee................... ............ ............ ............
52.216-11........................... Cost Contract-No Fee............ ............ ............ ............
52.216-11 Alt I..................... Cost Contract-No Fee............ ............ ............ ............
52.216-12........................... Cost-Sharing Contract-No Fee.... ............ ............ ............
52.216-12 Alt I..................... Cost-Sharing Contract-No Fee.... ............ ............ ............
52.216-15........................... Predetermined Indirect Cost ............ ............ ............
Rates.
52.216-16........................... Incentive Price Revision-Firm ............ ............ ............
Target.
52.216-16 Alt I..................... Incentive Price Revision-Firm ............ ............ ............
Target.
52.216-17........................... Incentive Price Revision- ............ ............ ............
Successive Targets.
52.216-17 Alt I..................... Incentive Price Revision- ............ ............ ............
Successive Targets.
52.216-18........................... Ordering........................ X X X
52.216-19........................... Order Limitations............... X X X
52.216-20........................... Definite Quantity............... X X X
52.216-21........................... Requirements.................... X X X
52.216-21 Alt I..................... Requirements.................... X X X
52.216-21 Alt II.................... Requirements.................... X X X
52.216-21 Alt III................... Requirements.................... X X X
52.216-21 Alt IV.................... Requirements.................... X X X
52.216-22........................... Indefinite Quantity............. X X X
52.216-22 Alt I..................... Indefinite Quantity............. X X X
52.216-22 Alt II.................... Indefinite Quantity............. X X X
52.216-23........................... Execution and Commencement of X X X
Work.
52.216-24........................... Limitation of Government X X X
Liability.
52.216-25........................... Contract Definitization......... X X X
52.216-25 Alt. I.................... Contract Definitization......... X X X
52.216-26........................... Payments of Allowable Costs ............ ............ ............
Before Definitization.
52.216-27........................... Single or Multiple Awards....... X X X
52.216-28........................... Multiple Awards for Advisory and ............ X ............
Assistance Services.
52.216-29........................... Time-and-Materials/Labor-Hour ............ ............ ............
Proposal Requirements--Other
Than Commercial Acquisition
With Adequate Price Competition.
52.216-30........................... Time-and-Materials/Labor-Hour ............ ............ ............
Proposal Requirements--Other
Than Commercial Acquisition
Without Adequate Price
Competition.
52.216-31........................... Time-and-Materials/Labor-Hour X X X
Proposal Requirements--
Commercial Acquisition.
52.216-32........................... Task-Order and Delivery-Order X X X
Ombudsman.
52.216-32 Alt. I.................... Task-Order and Delivery-Order X X X
Ombudsman.
52.217-2............................ Cancellation Under Multiyear X X X
Contracts.
52.217-3............................ Evaluation Exclusive of Options. X X X
52.217-4............................ Evaluation of Options Exercised X X X
at Time of Contract Award.
52.217-5............................ Evaluation of Options........... X X X
52.217-6............................ Option for Increased Quantity... X X X
52.217-7............................ Option for Increased Quantity- X X X
Separately Priced Line Item.
52.217-8............................ Option to Extend................ X X X
52.217-9............................ Option to Extend the Term of the X X X
Contract.
52.217-10........................... Reverse Auction................. X X X
52.217-11........................... Reverse Auction--Orders......... X X X
52.217-12........................... Reverse Auction Services........ ............ X ............
----------------------------------------------------------------------------------------------------------------
The FAR Council also reviewed subcontract flow down requirements in
clauses associated with the FAR parts covered by this proposed rule.
None of the clauses and provisions prescribed in FAR parts 16, 17, or
35 contain subcontract flow down requirements.
IV. Expected Impact of the Rule
A. Overview
The intended impact of the RFO, as stated in E.O. 14275, is to
restore the Government's ability to ``deliver on a timely basis the
best value product or service to the customer, while maintaining the
public's trust and fulfilling public policy objectives.'' Each of the
RFO rulemakings is designed to contribute to this impact by emphasizing
mission first, by aligning acquisition activities directly to achieving
the agency's overarching objectives and serving the public
[[Page 59483]]
interest and elevating the importance of fiscal responsibility. The
proposed RFO rules focus on three goals in particular: (1) timely
acquisition and delivery, (2) lower cost and accountability in all
spending, and (3) increased competition.
Timeliness. Timely acquisition and delivery are essential for
mission success. To this end, RFO rules propose to eliminate mandates
that unnecessarily interfere with agency discretion to determine the
best way to procure products and services. The proposed RFO rules
highlight more clearly streamlined and simplified authorities that
allow buyers to use their time more efficiently and are expected to
reduce time between solicitation and award. The proposed RFO rules are
expected to make it easier for contracting officers to leverage
commercial practices that are familiar to the marketplace. This is
expected to make it easier for sellers to engage and respond to
Government solicitations more rapidly.
Lower cost. E.O. 14271, Ensuring Commercial, Cost-Effective
Solutions in Federal Contracts (April 15, 2025), directs the Government
to utilize, to the maximum extent practicable, the commercial
marketplace and the innovations of private enterprise to provide
better, more cost-effective services to taxpayers, as envisioned by the
Federal Acquisition Streamlining Act. The procurement of custom
products and services where a suitable or superior commercial solution
would have fulfilled the Government's needs has resulted in avoidable
waste to the detriment of American taxpayers.
To address these concerns, consistent with associated
responsibilities in section 839 of the John S. McCain NDAA for FY 2019
(Pub. L. 115-232), the FAR Council reviewed prescriptions for
provisions and clauses to ensure all prescriptions are clear regarding
their applicability to acquisitions for commercial products and
services. Currently, many prescriptions do not specify applicability to
commercial acquisitions and leave the applicability determination to
contracting officer interpretation. By specifically stating when a
provision or clause can be applied to commercial acquisitions, proposed
RFO rules should decrease the likelihood of inclusion of provisions and
clauses in commercial acquisitions that are not required by law and
drive greater consistency in the terms and conditions used in these
contracts. In turn, these changes should increase the participation of
commercial sellers, who are unwilling or unable to manage the cost of
complying with noncommercial requirements, and also improve taxpayer
access to affordable commercial solutions.
Some RFO rules propose to delete requirements placed on commercial
or noncommercial sellers that are not related to performance of the
contract, drive up cost without attendant performance benefits, and may
misdirect efforts away from innovation, investment and economic growth.
Greater emphasis on timeliness should reduce bidders' carrying costs,
enabling them to pass those savings on to customers through lower
prices.
Increased competition. Since enactment of the Competition in
Contracting Act of 1984 (Title VII of Pub. L. 98-369), competition has
been the cornerstone of the Federal acquisition system. The benefits of
competition are well established: competition saves money for the
taxpayer, improves contractor performance, curbs fraud, and promotes
accountability for results. Competition also drives contractor
resilience and positions the U.S. market to develop a strategic
advantage for the nation.
According to data in the SAM Contract Award Management, roughly 45
percent of contract dollars were awarded in FY 2025 either without
competition or with competition that received only one offer. Of equal
concern, the Federal marketplace has seen a significant decline over
the past 20 years in the number of businesses--especially small
businesses--participating in the Federal supplier base. Studies suggest
that high compliance costs lead to the misallocation of resources away
from more profitable activities and discourage innovation, investment,
and economic growth (Council of Economic Advisers, Executive Office of
the President. June 2025. The Economic Benefits of Current Deregulatory
Policies. <a href="https://www.whitehouse.gov/wp-content/uploads/2025/03/The-Economic-Benefits-of-Current-Deregulatory-Efforts.pdf">https://www.whitehouse.gov/wp-content/uploads/2025/03/The-Economic-Benefits-of-Current-Deregulatory-Efforts.pdf</a>). This may
shelter incumbent contractors and stifle competition, reducing startup
activity and job formation.
The RFO rules seek to increase participation in agency competitions
and the resilience of the Federal supplier base, which includes
commercial entities, small businesses, manufacturers, and
nontraditional suppliers. The RFO will achieve this outcome by removing
regulatory mandates that are not rooted in statute or essential to
sound procurement, promoting greater reliance on practices that reduce
transaction costs, and improving the quality of communications with
offerors and potential offerors. Access to a broader range of solutions
in a more dynamic marketplace will drive better return for each
taxpayer dollar spent and increase taxpayer confidence in the Federal
acquisition system.
B. Impact of Rule
The Government has conducted a regulatory impact analysis (RIA) for
the RFO rulemaking inclusive of this proposed rule for FAR parts 16,
17, and 35. The RIA includes a discussion of the anticipated effects of
the rulemakings as follows:
1. FAR Part 16.
This proposed rule would implement revisions to FAR part 16, Types
of Contracts, that are expected to have a significant positive impact
on both industry and the Government. These changes are intended to
benefit and reduce burden on both Government and contractors.
1.1 Shift from Restrictive to Permissive Framework in Contract Type
Selection.
The proposed rule would shift the guiding principles on contract
type selection from a restrictive to a permissive framework, consistent
with 10 U.S.C. 3321 and 41 U.S.C. 3901. This change would allow
agencies to more easily utilize contract types not explicitly mentioned
in the FAR and allow for better congruence with commercial practices if
the contract type promotes the best interest of the Government and is
not expressly prohibited by statute.
This change would reduce Government burden by reducing the number
of deviations and associated reviews sought. This change would reduce
the burden on contractors by allowing the Government to utilize the
same contract types used in the private sector.
1.2 Firm-Fixed Price Contracts on a Consumption Basis.
The proposed rule would include new paragraph 16.202-2(b),
Consumption basis, and new section 16.202-3, Required content. The
inclusion of this paragraph and section would clarify that the use of
fixed-price units on a consumption basis is a type of firm-fixed-price
contract type. The proposed rule would revise the FAR in conformance
with section 1825 of the NDAA for FY 2026 (Pub. L. 119-60), which
required the Department of Defense to implement procurement policies
relevant to consumption-based solutions, to ensure consistent
application across the Government.
[[Page 59484]]
The inclusion of consumption-based solutions supports agencies when
using this common commercial practice for procuring a variety of
supplies and services, including but not limited to cloud computing
capacity. This change would reduce Government burden by reducing the
number of deviations and associated reviews sought, and seeks to reduce
the burden on contractors by allowing for the use of the same contract
types used in the private sector.
1.3 On-ramps and Off-ramps under Multiple-Award Contracts.
The proposed rule includes policies and procedures related to ``on-
ramping'' (adding new contractors) and ``off-ramping'' (removing
contractors) from a multiple-award contract to maintain a current,
competitive, and innovative pool of vendors. New Alternates I and II to
provision 52.216-22, Indefinite Quantity, are included to provide for
off-ramps with various cancellation policies.
This change is expected to benefit the Government through ensuring
continued competition throughout the life of a multiple-award contract
and through cost savings in reducing the payment of minimums for
awardees who choose not to engage in order competitions under the
multiple-award contract. This is expected to benefit contractors in
allowing for the ability to propose to enter existing indefinite
delivery vehicles, and to choose to exit multiple-award contracts to
avoid administrative expenses without the use of termination procedures
or costly negotiations.
1.4 Inclusion of Blanket Purchase Agreements (BPAs) under Multiple-
Award Contracts.
The proposed rule includes the policies and procedures to issue and
use BPAs under multiple-award contracts, similar to those permitted
under the Federal Supply Schedules. BPAs are anticipated to facilitate
strategic demand management, especially for IT, professional services,
and recurring operational support. BPAs would allow for concentrated
competition amongst vendors with relevant capabilities and aligned
pricing models, resulting in higher-quality proposals and better
mission outcomes. Agencies may create small business BPAs to support
sustained participation of small business vendors.
This change is expected to benefit the Government in encouraging
use of existing multi-award contracts by reducing transaction costs for
repetitive buys through the use of pre-priced supplies or services,
allowing agencies to move faster without sacrificing competition. This
rule would reduce administrative burden for contractors and Government,
by removing the need for repetitive order solicitations, duplicative
evaluations, and duplicative documentation.
Because prices for out-years or additional items can be set
competitively in the initial issuance of a BPA, this rule is expected
to benefit contractors in increased utilization of existing multi-award
contracts and reduced proposal costs for new orders and sole-source
modifications. Vendors under BPAs know to expect recurring
opportunities, allowing agencies to recognize cost savings through
ceiling rates and volume-based or tiered pricing.
1.5 Significant Reorganization of Ordering Procedures for Task-
Order Contracts and Delivery-Order Contracts.
The rule would reorganize the postaward ordering placement into two
sections: 16.606, which is applicable to all task-order contracts and
delivery-order contracts, regardless of the number of awardees, and
16.607, which is applicable to multiple-award contracts only. Section
16.607 would provide tailored procedures based on dollar thresholds--
including micro-purchase rules and fair-opportunity requirements--and
reinforces the contracting officer's discretion in order placement
procedures. By encouraging innovation and customized acquisition
strategies, these improvements would strengthen competition and allow
more tailored ordering solutions.
These changes are expected to benefit both the Government and
contractors with clear requirements, shorter order solicitations,
streamlined comparisons instead of traditional Part 15-adjacent source
selections, and the potential to reduce proposal costs through the use
of task and delivery order solicitations that only require information
needed to make an informed selection decision.
1.6 Inclusion of FAR Case 2020-005, Explanations to Unsuccessful
Offerors on Certain Orders Under Task-Order Contracts and Delivery-
Order Contracts (88 FR 53855).
To align with section 874 of the FY2020 NDAA, the rule would
require agencies to send brief written explanations upon request to
contractors who competed but did not win task or delivery orders valued
between the SAT and $7.5 million. This change would bolster
transparency, giving industry insight into evaluation results and
helping them refine future proposals and ensuring consistency and
fairness in feedback delivery.
1.7 Streamlining of 52.216-7, Allowable Cost and Payment.
The proposed rule would remove a number of required items for an
adequate indirect cost proposal in clause 52.216-7, Allowable Cost and
Payment, paragraph (d)(2)(iii). The removal of these items would reduce
the amount of information required from contractors for an incurred
cost audit submission, and would therefore provide a reduction in the
time required for contract closeout and impact settlement agreements.
Less information required from the contractors would reduce the time
the Government requires to analyze this information.
2. Part 17.
This proposed rule would implement revisions to FAR Part 17,
Special Contracting Methods, that are expected to have a positive
impact and reduce burden on both industry and the Government.
2.1 Removal of the General Five-Year Limitation on Contract
Duration.
The proposed rule would replace the non-statutory five-year
limitation on contract duration for all contracts previously included
at 17.204(e) with a requirement to ``follow any statutory or regulatory
limits on contract duration.'' This removal would allow agencies to
more easily align contract structure with mission realities, allowing
for contracts to be re-competed when performance demands versus an
arbitrary calendar. For those actions not restricted by statute or
regulation, duration would be a business judgement based on what best
supports mission outcomes, competition, and value.
For the Government, contract durations based on mission needs
instead of an arbitrary, unrelated timeline would result in more
realistic acquisition strategies, fewer workaround structures, and
better mission continuity. Competition is still a motivator for
positive performance, either for future solicitations or for orders
under multiple-award contracts or blanket purchase agreements.
This change would allow for contractors to spread startup costs
over longer periods, capture lifecycle savings, and avoid paying
repeatedly for ``year one'' inefficiencies, providing for an overall
lower total cost of projects. Framing contract duration based on
mission needs instead of an arbitrary five-year limitation would reduce
the burden of too-frequent competition, including the acquisition
resources, proposal costs, and performance risk associated, allowing
teams to focus on mission delivery. Realistic contract durations based
on mission needs would allow contractors to invest in workforce
development, process
[[Page 59485]]
improvement, and price more rationally to create value over the long
term. By reducing the competition cycle, this change would help to
alleviate contractor workforce attrition and the associated knowledge
and morale loss.
2.2 Modernize Option for Increased Quantity Clauses to Apply to
Both Services and Supplies.
The proposed rule would provide contracting officers with a
corresponding policy to allow the use of FAR clause 52.217-6, Option
for Increased Quantity, and 52.217-7, Option for Increased Quantity--
Separately Priced Line Item, when procuring additional quantities of
supplies or services during a contract's performance period. These
clauses were previously only applicable to supplies.
The use of these clauses for services would enable the initial
competition to reflect the anticipated reality of the mission instead
of having to react to it. The inclusion of such a clause during initial
competition of the contract would allow for the prices included for
such surge requirements to be determined on the basis of competition,
rather than negotiated as a sole-source modification during contract
administration.
This rule is expected to benefit the Government and contractors in
allowing for competitively priced volume-based or tiered pricing for
additional services, resulting in lower total cost and administrative
burden.
This rule would reduce acquisition time and costs associated with
seeking a deviation or drafting of acquisition-unique clauses for such
an effort, which has been a common practice across the Government. The
cost and lead time associated with exercising an option for increased
quantity is significantly lower than that of issuing a sole-source
modification or engaging in a competition for a new award of the same
items. This rule therefore eliminates redundant solicitations, reduces
the review cycle, and allows for more meaningful competition reflective
of the anticipated future need.
For contractors, this rule is expected to provide visibility into
potential future requirements and a clear ceiling for additional work,
allowing for better planning and more accurate forecasting. These
elements would result in lower bid and proposal costs because neither a
new competition nor a sole-source modification would be required.
2.3 Modernize Option to Extend Services to Apply to Services and
Supplies.
The proposed rule would allow for the use of clause 52.217-8,
Option to Extend Services, renamed Option to Extend, in task-order
contracts and delivery-order contracts for requirements other than
services. This clause allows for the Government to continue to utilize
an existing contract for up to six months at the current rate.
Applicability of this clause was previously limited to only service
contracts.
This change would allow the Government to plan for necessary
extensions to existing contracts at the same price due to complex
transitions, slipped awards, delayed appropriations, and protests. The
use of this clause would prevent the loss of leverage and unfavorable
terms often experienced in last-minute negotiations for critical needs.
This change would allow for reduced acquisition time and costs
associated with negotiating a sole-source modification or engaging in a
competition for a new award for the same items. This change therefore
is expected to eliminate redundant solicitations and reduce the review
cycle, allowing the Government and the contractor to focus on the
mission and not expensive and time-intensive proposals and
negotiations.
2.4 Addition of Language on Handling of Expiring Contracts During a
Lapse in Appropriations.
The proposed rule would include a new paragraph in clauses 52.217-
8, Option to Extend Services, renamed Option to Extend, and 52.217-9,
Option to Extend the Term of Contract, to allow for the Government and
contractor to toll or delay the option exercise time period up to 30
days after the resumption of Government operations in the event the
period to exercise the option ends during a lapse in appropriations.
The addition of this paragraph would allow for a more expedient
return to operations and allow for reduced transaction costs as a
result of a Government shutdown for both the Government and
contractors. This change would allow for reduced acquisition time and
costs associated with negotiating a sole-source contract or engaging in
a competition for a new award due to contracts with actionable option
periods ending during a lapse in appropriations.
For the Government, this change would reduce the risk of lapses of
critical supplies or services and prevent the loss of leverage and
unfavorable terms often experienced in last-minute negotiations for
critical needs. This change is expected to reduce future urgent
solicitations and the associated review cycle, allowing the Government
and the contractor to focus on the mission and not expensive and time-
intensive proposals and negotiations.
2.5 Changes to Management and Operating Contracts.
The proposed rule would remove language regarding competition and
reviews of contractor performance for Management and Operating
contracts. Removal of this non-statutory language would reduce
confusion and emphasize the use of competition in accordance with the
Competition in Contract Act of 1984. This is expected to benefit the
Government, as competition is the main driver of price reasonableness.
This is expected to benefit potential contractors, as well--providing
space to compete long-held sole-source contracts.
2.6 Incorporation of FAR Case 2023-0003, Prohibition on the Use of
Reverse Auctions for Complex, Specialized, or Substantial Design and
Construction Services (89 FR 70157).
The proposed rule would amend the FAR to implement section 2 of the
Construction Consensus Procurement Improvement Act of 2021 (Pub. L.
117-28). This proposed change is not expected to have a significant
impact on the public or the Government because the rulemaking does not
supersede current statutory direction on the use of FAR part 36
procedures for construction. Contracting officers would still be
required to conduct market research to determine the most appropriate
contracting method for the particular procurement. Requirements for
sealed bidding, design-build construction, and architect-engineering
services would remain unchanged.
Offerors participating in competitive procurements that are valued
at or below the SAT would still be provided advance notices and
solicitations in accordance with FAR 36.211 and for actions anticipated
to be awarded to a small business, 15 U.S.C. 644(w). Use of a reverse
auction as the method of obtaining pricing would not impact these
requirements.
3. Part 35 Research and Development.
This proposed rule would implement revisions to FAR part 35,
Research and Development Contracting, that are not expected to have a
significant impact on contractors, subcontractors, or the Government.
The proposed changes to FAR part 35 are primarily removal of
superfluous information and clarification of existing policies.
V. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is
[[Page 59486]]
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). E.O. 13563 emphasizes the
importance of quantifying both costs and benefits, of reducing costs,
of harmonizing rules, and of promoting flexibility. This is a
significant regulatory action and, therefore, was subject to review
under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated
September 30, 1993.
VI. Executive Order 14192
This rule is subject to E.O. 14192, Unleashing Prosperity Through
Deregulation. This proposed rule, if finalized as proposed, is
anticipated to be an E.O. 14192 deregulatory action. See discussion in
the ``Expected Impact of the Rule'' section of this preamble.
VII. Regulatory Flexibility Act
This proposed rule, if finalized, may have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5 U.S.C. 601-612. However, an Initial
Regulatory Flexibility Analysis (IRFA) is as follows:
1. Reasons for the action.
Executive Order (E.O.) 14275, Restoring Common Sense to Federal
Procurement, directs the elimination of excessive acquisition
regulations to stop the inefficient use of American taxpayer
dollars. The E.O. directs the first comprehensive end-to-end
overhaul of the FAR in its 40-year history. The E.O. establishes the
policy that the FAR should ``contain only provisions that are
required by statute or that are otherwise necessary to support
simplicity and usability, strengthen the efficacy of the procurement
system, or protect economic or national security interests.'' In
response to E.O. 14275, the Office of Management and Budget issued
memorandum M-25-26, Overhauling the Federal Acquisition Regulation.
The Memo directed the FAR Council to complete a ``revolutionary
overhaul'' of the FAR. Therefore, the FAR Council is issuing twelve
proposed rules that collectively, if finalized, will streamline the
FAR in its entirety.
2. Objectives of, and legal basis for, the rule.
The revolutionary FAR overhaul (RFO) rewrite represents a
paradigm shift in Federal acquisition. It emphasizes streamlining,
clarity, and accessibility, while ensuring that the regulation
focuses only on statutory mandates and foundational procurement
principles. The RFO is designed to simplify compliance for
contracting professionals, improve acquisition speed and agility,
and reinforce mission outcomes over process formalities.
The basis for the RFO is E.O. 14275. The authority for
promulgation of the FAR is 41 U.S.C. 1121(b); 40 U.S.C. 121(c); 10
U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10
U.S.C. 3016); and 51 U.S.C. 20113.
3. Description of and an estimate of the number of small
entities to which the rule will apply.
All small entities who want to contract with the Federal
Government will have to familiarize themselves with the reorganized,
streamlined, and revised FAR, including the content of this
rulemaking. As of January 2026, there are 401,196 entities
registered in the System for Award Management (SAM) that were small
for at least one North American Industry Classification System
(NAICS) code they had selected.
Proposed revisions to FAR parts 16, 17, and 35, and associated
changes in FAR part 52, apply broadly to all Federal offerors and
contractors, including small businesses across all sectors.
This proposed rule may have a positive impact on small entities
by simplifying and streamlining acquisition regulations. Because
these changes do not impose new reporting, recordkeeping, or
compliance obligations on contractors, including small entities, and
do not require changes to internal systems, ethics programs, or
business practices, they are not expected to result in additional
costs. Accordingly, the proposed revisions to FAR parts 16, 17, and
35 and associated changes in FAR part 52 do not have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act.
4. Description of projected reporting, recordkeeping, and other
compliance requirements of the rule.
This proposed rule does not create any new reporting,
recordkeeping, or other compliance requirements. Instead, this
proposed rule, if finalized, would reduce the following existing
reporting requirements.
a. Clause 52.216-7, Allowable Cost and Payment, (d)(2)(iii)
would be edited to reduce the required data to be submitted to
support an adequate indirect cost rate proposal. For more
information about the changes to reporting requirements, see section
VIII of this notice.
b. Clause 52.216-15, Predetermined Indirect Cost Rates. This
clause repeats the requirement in the clause at FAR 52.216-7,
paragraph (d), for the contractor to submit an adequate final
indirect cost rate proposal, and therefore the same expected
reduction in reporting requirements.
5. Relevant Federal rules which may duplicate, overlap, or
conflict with the rule.
The proposed rule, if finalized, would not duplicate, overlap,
or conflict with other Federal rules.
6. Description of any significant alternatives to the rule which
accomplish the stated objectives of applicable statutes, and which
minimize any significant economic impact of the rule on small
entities.
The FAR Council has not, at this stage, identified any
significant alternatives that would minimize the impact of the rule
on small entities while also implementing the requirements of E.O.
14275. The FAR Council will consider any significant alternatives
identified by commenters for the final rule.
The Regulatory Secretariat Division has submitted a copy of the
IRFA to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the IRFA may be obtained from the Regulatory
Secretariat Division. The FAR Council invites comments from small
business concerns and other interested parties on the expected impact
of this proposed rule on small entities.
The FAR Council will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite ``5 U.S.C. 610 (FAR Case 2026-
006)'' in correspondence.
VIII. Paperwork Reduction Act
This rule includes information collections under the Paperwork
Reduction Act (44 U.S.C. 3501-3521). Following are the specific
collections associated with each FAR part in this rule as previously
approved by OMB followed by how each collection would be affected by
the proposed rule. If a FAR part is not listed below, then there are no
information collections associated with the part.
A. FAR Part 16
1. OMB Control No. 9000-0067, Certain Federal Acquisition
Regulation Part 16 Contract Pricing Requirements--FAR Sections
Affected: 52.216-2, 52.216-3, 52.216-4, 52.216-5, 52.216-6, 52.216-16,
and 52.216-17.
The changes under this proposed rule, if finalized, would not
affect the information collection or the paperwork burden previously
approved by OMB. The collection would remain unchanged.
2. OMB Control No. 9000-0069, Indirect Cost Rate Proposals,
Payments to Small Business Subcontractors, and Bankruptcy
Notifications--FAR Sections Affected: 52.216-7, 52.216-15, 52.242-4,
52.242-5 and 52.242-13.
The changes under this proposed rule, if finalized, would revise
this information collection and the paperwork burden previously
approved by OMB.
a. Clause 52.216-7, Allowable Cost and Payment, (d)(2)(iii) has
been edited to reduce the required data to be submitted to support an
adequate indirect cost rate proposal.
Paragraph (j), Subcontract Information, is now limited to only
those subcontracts with a value exceeding the threshold for requiring
certified cost or pricing data as prescribed in FAR 15.403-3.
[[Page 59487]]
The detailed information previously required by paragraph (k) for
time-and-materials and labor-hour contracts such as labor rates, labor
hours, and other detailed costs elements was removed and relocates only
the summary level information to paragraph (h).
Paragraph (l), which required submission of reconciliation of total
payroll per IRS form 941 to total labor costs distribution, is removed
in its entirety.
The information previously required by paragraph (o) for contracts
physically completed in this fiscal year has been relocated to
paragraph (h) and is limited to level-of-effort information, contract
ceiling amount, and an indication of whether the contract is ready to
close. Contract fee computations are no longer required.
The proposed changes are expected to decrease the overall burden
related to the preparation and submission of incurred costs proposals
and streamline the initial determination adequacy. Contractors will
spend less time preparing the submission and estimate 10 percent based
on the statements from Industry in their response to OIRA's Request for
Information (RFI) for burden reduction suggestion. In addition,
contractors and Government will spend less time reviewing and
discussing information that provide little value to the initial
adequacy determination. These changes will promote efficiency in the
setting of final indirect cost rates.
b. Clause 52.216-15, Predetermined Indirect Cost Rates, repeats the
requirement in the clause at FAR 52.216-7, paragraph (d), for the
contractor to submit an adequate final indirect cost rate proposal,
however it does not impose any additional reporting requirements.
c. The revised annual burden is estimated as follows:
Respondents/Recordkeepers: 6,265.
Total Annual Responses: 6,265.
Total Burden Hours: 1,353,807.
B. Comments Regarding Paperwork Burden
The FAR Council will publish a separate first notice in accordance
with the Paperwork Reduction Act seeking comments on the changes to the
collections of information affected by this proposed rule.
IX. Severability
If any portion (e.g., section, clause, sentence) of this rule is
held to be invalid or unenforceable facially, or as applied to any
entity or circumstance, it shall be severable from the remainder of
this rule, and shall not affect the remainder thereof, or its
application to entities not similarly situated or to other dissimilar
circumstances. The various portions of this rule are independent and
serve distinct purposes. Even if one aspect were rendered invalid, the
other benefits of the rule would still be applicable.
List of Subjects in 48 CFR Parts 16, 17, 35, and 52
Government procurement.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Therefore, OFPP, DoD, GSA, and NASA propose amending 48 CFR parts
16, 17, 35, and 52 as set forth below:
0
1. Revise parts 16, 17, and 35 to read as follows:
PART 16--TYPES OF CONTRACTS
Sec.
16.000 Scope of part.
16.001 Definitions.
Subpart 16.1--Selecting Contract Types
16.101 Policies.
16.102 Negotiating contract type.
16.103 Documenting contract type.
16.104 Executive Order 14402 justification for covered contracts and
orders.
16.105 Solicitation provision.
Subpart 16.2--Fixed-Price Contracts
16.201 General.
16.202 Firm-fixed-price contracts.
16.202-1 Description.
16.202-2 Application.
16.202-3 Required content.
16.203 Fixed-price contracts with economic price adjustment.
16.203-1 Description.
16.203-2 Application.
16.203-3 Limitations.
16.203-4 Contract clauses.
16.204 Fixed-price contracts with prospective price redetermination.
16.204-1 Description.
16.204-2 Application.
16.204-3 Limitations.
16.204-4 Contract clause.
16.205 Fixed-ceiling-price contracts with retroactive price
redetermination.
16.205-1 Description.
16.205-2 Application.
16.205-3 Limitations.
16.205-4 Contract clause.
16.206 Firm-fixed-price, level-of-effort term contracts.
16.206-1 Description.
16.206-2 Application.
16.206-3 Limitations.
Subpart 16.3--Cost-Reimbursement Contracts
16.301 General.
16.301-1 Description.
16.301-2 Application.
16.301-3 Limitations.
16.302 Cost contracts.
16.303 Cost-sharing contracts.
16.304 Cost-plus-fixed-fee contracts.
16.304-1 Description.
16.304-2 Limitations.
16.304-3 Completion and term forms.
16.305 Contract clauses.
Subpart 16.4--Incentive Contracts
16.401 General.
16.401-1 Description.
16.401-2 Limitations.
16.401-3 Collection and analysis of fee data.
16.401-4 Incentive strategy best practices.
16.402 Award-fee.
16.402-1 Application.
16.402-2 Limitations.
16.402-3 Fixed-price contracts with award fees.
16.402-4 Cost-plus-award-fee contracts.
16.403 Application of predetermined, formula-type incentives.
16.403-1 Cost incentives.
16.403-2 Performance incentives.
16.403-3 Delivery incentives.
16.403-4 Structuring multiple-incentive contracts.
16.404 Fixed-price cost incentive contracts.
16.404-1 Fixed-price cost incentive (firm target) contracts.
16.404-2 Fixed-price cost incentive (successive targets) contracts.
16.405 Cost-plus-incentive-fee contracts.
16.406 Contract clauses.
Subpart 16.5--Time-and-Materials and Labor-Hour Contracts
16.500 Scope.
16.501 Time-and-materials contracts.
16.501-1 Description.
16.501-2 Application.
16.501-3 Limitations.
16.501-4 Solicitation provisions.
16.501-5 Postaward requirements.
16.502 Labor-hour contracts.
Subpart 16.6--Indefinite-Delivery Contracts
16.600 Scope.
16.601 General.
16.601-1 Definitions.
16.601-2 Policies.
16.602 Definite-quantity contracts.
16.602-1 Description.
16.602-2 Application.
16.603 Requirements contracts.
16.603-1 Description.
16.603-2 Application.
16.603-3 Limitations.
16.603-4 Required content.
16.604 Indefinite-quantity contracts.
16.604-1 Description.
16.604-2 Application.
16.604-3 Multiple award preference.
16.604-4 On-ramps and off-ramps.
16.604-5 Required content.
16.605 Solicitation provisions and contract clauses.
16.606 Postaward procedures for placement of task and delivery
orders.
16.607 Additional ordering procedures for multiple-award contracts.
16.607-1 Placement of orders valued at or below the micro-purchase
threshold.
16.607-2 Fair opportunity procedures.
16.607-3 Orders exceeding the micro-purchase threshold but not more
than the SAT.
16.607-4 Orders exceeding the SAT but not more than $7.5 million.
[[Page 59488]]
16.607-5 Orders exceeding $7.5 million.
16.607-6 Exceptions to fair opportunity.
16.607-7 Items peculiar to one manufacturer.
16.608 Protests of orders.
Subpart 16.7--Letter Contracts
16.701 Description.
16.702 Application.
16.703 Limitations.
16.704 Contract clauses.
Subpart 16.8--Agreements
16.801 Scope.
16.802 Basic agreements.
16.802-1 Description.
16.802-2 Application.
16.802-3 Limitations.
16.803 Basic ordering agreements.
16.803-1 Description.
16.803-2 Application.
16.803-3 Limitations.
Authority: 41 U.S.C. 1121(b); 40 U.S.C. 121(c); 10 U.S.C.
chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C.
3016); and 51 U.S.C. 20113.
16.000 Scope of part.
This part prescribes policies and procedures for selecting contract
type(s) appropriate to the circumstances of the acquisition. Except for
limited instructions regarding the placement of task and delivery
orders, the entirety of this part applies to the pre-solicitation phase
and is meant to guide acquisition planning.
16.001 Definitions.
As used in this part--
Award-Fee Board means the team of individuals identified in the
award-fee plan who have been designated to assist the Fee-Determining
Official in making award-fee determinations.
Consumption-based solution means a model under which a service is
provided to the Government and may utilize any combination of software,
hardware or equipment, data, and labor or services that provides a
capability that is metered and billed based on actual usage at fixed-
price units.
Established price means a price that--
(1) Is an established catalog or market price for a commercial
product or commercial service sold in substantial quantities to the
general public; and
(2) Is the net price after applying any standard trade discounts
offered by the contractor.
Fee-Determining Official means the designated agency official(s)
who reviews the recommendations of the Award-Fee Board in determining
the amount of award fee to be earned by the contractor for each
evaluation period.
Rollover of unearned award fee means the process of transferring
unearned award fee, which the contractor had an opportunity to earn,
from one evaluation period to a subsequent evaluation period, thus
allowing the contractor an additional opportunity to earn that
previously unearned award fee.
Subpart 16.1--Selecting Contract Types
16.101 Policies.
(a) Unless expressly prohibited by statute or this regulation,
contract types that promote the best interests of the Government, but
are not described in this regulation, are permitted for use in
accordance with agency procedures (see 10 U.S.C. 3321(a) and 41 U.S.C.
3901). Ensure selection of contract type is consistent with the Guiding
Principles for the System in 1.102.
(b) Do not use a cost-plus-a-percentage-of-cost system of
contracting (see 10 U.S.C. 3322(a) and 41 U.S.C. 3905(a)).
(c) Prime contracts (including letter contracts) other than firm-
fixed-price contracts must, by an appropriate clause, prohibit cost-
plus-a-percentage-of-cost subcontracts (see clauses prescribed in part
44 for cost-reimbursement contracts and part 16 for fixed-price
contracts).
16.102 Negotiating contract type.
(a)(1) Selecting the contract type is generally a matter for
negotiation and requires the exercise of sound judgment. Consider
contract terms, risks (e.g., technical, performance, delivery), and
pricing.
(2) Contracting officers may instruct offerors in the solicitation
to propose an alternative contract type within their response to the
solicitation.
(b) Fixed-price contract types are the default and preferred
contract types. If a fixed-price contract type is not appropriate for
an entire contract, consider whether a portion of the contract can be
established on a fixed-price basis.
(c) Use a firm-fixed-price contract (see section 16.202) when the
risk involved is minimal or can be predicted with an acceptable degree
of certainty. However, when a reasonable basis for firm pricing does
not exist, consider other contract types and negotiate a contract type
(or combination of types) that will appropriately tie profit to
contractor performance.
(d) In the course of an acquisition program, a series of contracts,
or a single long-term contract, changing circumstances may necessitate
different contract types than those used initially. Contracting
officers should avoid extended use of a cost-reimbursement or time-and-
materials contract after experience provides a basis for firmer
pricing.
16.103 Documenting contract type.
(a) Except as identified in paragraph (b) of this section, document
and explain in the acquisition plan, or in the contract file if a
written acquisition plan is not required by agency procedures--
(1) Why the contract type selected must be used to meet the
agency's needs. For other than fixed-price contracts, discuss--
(i) An analysis of why the use of other than a fixed-price contract
(e.g., cost reimbursement, time-and-materials, labor hour, innovative
contract type) is appropriate;
(ii) Rationale that details specific facts and circumstances (e.g.,
lack of incentive to control costs, complexity of the requirements,
uncertain work duration, contractor's technical capability and
financial responsibility, or adequacy of the contractor's accounting
system), and associated reasoning essential to support the contract
type selection;
(2) The Government's risks and the burden to manage the contract
type selected. As applicable, discuss--
(i) How the Government identified the risks (e.g., pre-award
survey, or past performance information);
(ii) The nature of the risks (e.g., inadequate contractor's
accounting system, weaknesses in contractor's internal control, non-
compliance with Cost Accounting Standards, or lack of or inadequate
earned value management system); and
(iii) How the Government will manage and mitigate the risks;
(3) An assessment of whether Government resources are adequate to
properly plan for, award, and administer the contract type selected
(e.g., resources needed and the additional risks to the Government if
adequate resources are not provided);
(4) Why a level-of-effort, price redetermination, or fee provision
was included; and
(5) For other than a fixed-price contract, a discussion of planned
actions to minimize the use of other than fixed-price contracts on
future acquisitions for the same requirement and to transition to
fixed-price contracts to the maximum extent practicable.
(b) Documentation of contract type is not required for the
following:
(1) Fixed-price acquisitions made under simplified acquisition
procedures.
(2) Contracts on a firm-fixed-price basis (see section 16.202)
other than those for major systems or research and development.
[[Page 59489]]
16.104 Executive Order 14402 justification for covered contracts and
orders.
(a) Definition. As used in this section, covered contract or order
means a contract or order that is--
(1) Other than fixed-price;
(2) Firm-fixed-price, level-of-effort term; or
(3) A hybrid contract that includes one or more elements described
in paragraphs (1) and (2).
(b) Policy. This section implements Executive Order 14402,
Promoting Efficiency, Accountability, and Performance in Federal
Contracting, April 30, 2026. The head of the agency must approve a
written justification described in paragraph (d) of this section prior
to using a covered contract or order.
(c) Application. (1) Thresholds. Unless an exception in paragraph
(e) of this section applies, a justification is required for covered
contracts and orders valued at or above--
(i) $100 million, for DoD;
(ii) $35 million, for NASA;
(iii) $25 million, for Department of Homeland Security; or
(iv) $10 million, for all other Federal agencies.
(2) Hybrid contracts or orders. A hybrid contract or order is a
covered contract or order when the value of the other than fixed-price
or firm-fixed-price, level-of-effort term portion meets or exceeds the
thresholds.
(3) Single-award indefinite-delivery contracts. A single-award
indefinite-delivery contract (IDC) is a covered contract if the
estimated total value of the known and forecasted covered orders meets
or exceeds the thresholds. Use the contract ceiling price if the
contract only allows for covered orders.
(4) Blanket purchase agreements. The head of the agency decides
whether the justification requirement applies when the blanket purchase
agreement (BPA) is awarded, or when each order under the BPA is placed.
(5) Duration of a justification. An approved justification is valid
for the duration of the contract or order.
(d) Procedures. (1) Submit to the head of the agency the required
justification for approval that includes--
(i) The information in section 16.103; and
(ii) Any determination and findings required for the contract type
(see 12.104(b)(1), 16.401-2, 16.501-3).
(2) The head of the agency may only delegate the justification
approval to the chief acquisition officer of the agency or another non-
career official in the Senior Executive Service within the agency.
(e) Exceptions. The justification requirement does not apply to--
(1) Multiple-award contracts. However, the justification
requirement does apply to task orders, delivery orders, and BPAs under
those contracts;
(2) Contracts in support of a response to an emergency, major
disaster, or contingency operation;
(3) Research and development contracts or orders (see part 35); or
(4) Pre-production development for a major system acquisition (see
part 34).
16.105 Solicitation provision.
The contracting officer may complete and insert the provision at
52.216-1, Type of Contract, in a solicitation, including those for
commercial products and commercial services. When the solicitation
provides the opportunity for an offeror to propose an alternative
contract type, use the provision with its Alternate I.
Subpart 16.2--Fixed-Price Contracts
16.201 General.
(a) Fixed-price types of contracts provide for a firm price or, in
certain cases, an adjustable price. Fixed-price contracts with
adjustable prices may include a ceiling price, a target price
(including target cost), or both. Unless otherwise specified in the
contract, the ceiling price or target price may only be adjusted
through contract clauses that provide for equitable adjustment or other
revision of the contract price under stated circumstances.
(b) Use firm-fixed-price or fixed-price with economic price
adjustment contracts when acquiring commercial products and commercial
services, except as provided in 12.104.
(c) Time-and-materials contracts and labor-hour contracts are not
fixed-price contracts.
16.202 Firm-fixed-price contracts.
16.202-1 Description.
(a) General. A firm-fixed-price contract provides for a price that
is not subject to any adjustment on the basis of the contractor's
experience in performing the contract.
(b) Incentives. The contracting officer may use a firm-fixed-price
contract in conjunction with an award-fee incentive (see 16.402) and
performance or delivery incentives (see 16.403-2 and 16.403-3) when the
award fee or incentive is based solely on factors other than cost. The
contract type remains firm-fixed-price when used with these incentives.
16.202-2 Application.
(a) General. A firm-fixed-price contract is suitable for acquiring
supplies or services on the basis of clearly defined functional or
detailed specifications (see part 11) when the contracting officer can
establish fair and reasonable prices at the outset.
(b) Consumption basis. Contracting officers may acquire
consumption-based solutions where supplies and services are capable of
being metered and billed based on actual usage as fixed-price units.
16.202-3 Required content.
When acquiring on a consumption basis, the contract must include
the following:
(a) Predetermined pricing at fixed-price units. The contractor may
offer volume discounts or other equitable adjustments to the unit
price(s) without changing the contract type.
(b) A guaranteed minimum, a ceiling, and fiscal controls limiting
the agency's obligation to the obligated funding identified in the
contract (see part 32).
(c) A requirement for the contractor to notify the contracting
officer when the Government has used 75 percent and 90 percent of the
funded amount, respectively, of the contract.
16.203 Fixed-price contracts with economic price adjustment.
16.203-1 Description.
(a) A fixed-price contract with economic price adjustment provides
for upward and downward revision of the stated contract price when
specific events occur. Economic price adjustments are of three general
types:
(1) Adjustments based on established prices. These price
adjustments are based on increases or decreases from an agreed-upon
level in published or established prices of specific items or the
contract end items.
(2) Adjustments based on actual costs of labor or material. These
price adjustments are based on increases or decreases in specified
costs of labor or material that the contractor actually experiences
during contract performance.
(3) Adjustments based on cost indexes of labor or material. These
price adjustments are based on increases or decreases in labor or
material cost standards or indexes that are specifically identified in
the contract.
(b) The contracting officer may use a fixed-price contract with
economic price adjustment in conjunction with an award-fee incentive
(see 16.402) and performance or delivery incentives (see 16.403 and
16.404). This combination is appropriate when the award fee or
incentive is based solely on factors other than cost. The contract type
remains fixed-price with economic price
[[Page 59490]]
adjustment when used with these incentives.
16.203-2 Application.
(a) A fixed-price contract with economic price adjustment may be
used when--
(1) There is serious doubt concerning the stability of market or
labor conditions that will exist during an extended period of contract
performance; and
(2) Contingencies that would otherwise be included in the contract
price may be identified and covered separately in the contract. Price
adjustments based on established prices should normally be restricted
to industry-wide contingencies. Price adjustments based on labor and
material costs should be limited to contingencies beyond the
contractor's control. For use of economic price adjustment in sealed
bid contracts, see part 14.
(b) When establishing the base level from which adjustments will be
made, do not include contingency allowances in both the base price and
the adjustment requested by the contractor under the economic price
adjustment clause.
(c) In contracts that do not require submission of certified cost
or pricing data, obtain adequate data to establish the base level from
which adjustment will be made and require verification of data
submitted if necessary.
16.203-3 Limitations.
A fixed-price contract with economic price adjustment may be used
only if the contracting officer determines that it is necessary to
protect the contractor and the Government against significant
fluctuations in labor or material costs or to provide for contract
price adjustment in the event of changes in the contractor's
established prices.
16.203-4 Contract clauses.
(a) Adjustment based on established prices-standard supplies.
(1) Insert the clause at 52.216-2, Economic Price Adjustment-
Standard Supplies, or an agency-prescribed clause, in solicitations and
contracts, including those for commercial products or commercial
services, when contracting by negotiation and all of the following
conditions apply:
(i) A fixed-price contract is contemplated.
(ii) The requirement is for standard supplies that have an
established catalog or market price.
(iii) The contracting officer has made the determination specified
in 16.203-3.
(2) The contracting officer may modify the clause by increasing the
10 percent limit on aggregate increases specified in 52.216-2(c)(1),
upon approval by the chief of the contracting office.
(b) Adjustment based on established prices-semistandard supplies.
(1) Insert the clause at 52.216-3, Economic Price Adjustment-
Semistandard Supplies, or an agency-prescribed clause in solicitations
and contracts, including those for commercial products or commercial
services, when contracting by negotiation and all of the following
conditions apply:
(i) A fixed-price contract is contemplated.
(ii) The requirement is for semistandard supplies for which the
prices can be reasonably related to the prices of nearly equivalent
standard supplies that have an established catalog or market price.
(iii) The contracting officer has made the determination specified
in 16.203-3.
(2) Before entering into the contract, the contracting officer and
contractor must agree in writing on the identity of the standard
supplies and the corresponding line items to which the clause applies.
(3) If the supplies are standard, except for preservation,
packaging, and packing requirements, the clause prescribed in 16.203-
4(a) must be used rather than this clause.
(4) The contracting officer may modify the clause by increasing the
10 percent limit on aggregate increases specified in 52.216-3(c)(1),
upon approval by the chief of the contracting office.
(c) Adjustments based on actual cost of labor or material. (1)
Insert a clause that is substantially the same as the clause at 52.216-
4, Economic Price Adjustment-Labor and Material, or an agency-
prescribed clause in solicitations and contracts, including those for
commercial products and commercial services, when contracting by
negotiation and all of the following conditions apply:
(i) A fixed-price contract is contemplated.
(ii) There is no major element of design engineering or development
work involved.
(iii) One or more identifiable labor or material cost factors are
subject to change.
(iv) The contracting officer has made the determination specified
in 16.203-3.
(2) Describe in detail in the contract Schedule--
(i) The types of labor and materials subject to adjustment under
the clause;
(ii) The labor rates, including fringe benefits (if any) and unit
prices of materials that may be increased or decreased; and
(iii) The quantities of the specified labor and materials allocable
to each unit to be delivered under the contract.
(3) When negotiating adjustments under the clause--
(i) Consider work in process and materials on hand at the time of
changes in labor rates, including fringe benefits (if any) or material
prices;
(ii) Not include in adjustments any indirect cost (except fringe
benefits as defined in 31.205-6(l) or profit); and
(iii) Consider only those fringe benefits specified in the contract
Schedule.
(4) The contracting officer may modify the clause by increasing the
10 percent limit on aggregate increases specified in 52.216-4(c)(4),
upon approval by the chief of the contracting office.
(d) Adjustments based on cost indexes of labor or material. The
contracting officer should consider using an economic price adjustment
clause based on cost indexes of labor or material in solicitations and
contracts, including those for commercial products or commercial
services, under the circumstances described in paragraphs(d)(1) and
(d)(2) of this section.
(1) A clause providing adjustment based on cost indexes of labor or
materials may be appropriate when--
(i) The contract involves an extended period of performance with
significant costs to be incurred beyond 1 year after performance
begins;
(ii) The contract amount subject to adjustment is substantial; and
(iii) The economic variables for labor and materials are too
unstable to permit a reasonable division of risk between the Government
and the contractor, without this type of clause.
(2) Any clause using this method must be prepared and approved
using agency procedures.
16.204 Fixed-price contracts with prospective price redetermination.
16.204-1 Description.
A fixed-price contract with prospective price redetermination
provides for--
(a) A firm-fixed-price for an initial period of contract deliveries
or performance; and
(b) Prospective redetermination, at a stated time or times during
performance, of the price for subsequent periods of performance.
16.204-2 Application.
A fixed-price contract with prospective price redetermination may
[[Page 59491]]
be used in acquisitions of quantity production or services for which it
is possible to negotiate a fair and reasonable firm-fixed-price for an
initial period, but not for subsequent periods of contract performance.
(a) The initial period should be the longest period for which it is
possible to negotiate a fair and reasonable firm-fixed-price. Each
subsequent pricing period should be at least 12 months.
(b) The contract may provide for a ceiling price based on
evaluation of the uncertainties involved in performance and their
possible cost impact.
16.204-3 Limitations.
This contract type may only be used when--
(a) Negotiations have established that using a firm-fixed-price or
fixed-price cost incentive contract is not appropriate for the
acquisition;
(b) The contractor's accounting system is adequate for price
redetermination;
(c) The prospective pricing periods can be made to conform with
operation of the contractor's accounting system; and
(d) There is reasonable assurance that price redetermination
actions will take place promptly at the specified times.
16.204-4 Contract clause.
Insert the clause at 52.216-5, Price Redetermination-Prospective,
in solicitations and contracts, other than those for commercial
products or commercial services, when contracting by negotiation, a
fixed-price contract is contemplated, and the conditions specified in
16.204-2 and 16.204-3 apply.
16.205 Fixed-ceiling-price contracts with retroactive price
redetermination.
16.205-1 Description.
A fixed-ceiling-price contract with retroactive price
redetermination provides for (a) a fixed ceiling price and (b)
retroactive price redetermination within the ceiling after completion
of the contract.
16.205-2 Application.
A fixed-ceiling-price contract with retroactive price
redetermination is appropriate when it is established at the outset
that a fair and reasonable firm-fixed-price cannot be negotiated, and
that the amount involved and short performance period make the use of
any other fixed-price contract type impracticable.
(a) A ceiling price must be negotiated for the contract at a level
that reflects a reasonable sharing of risk by the contractor. The
established ceiling price may be adjusted only if required by the
operation of contract clauses providing for equitable adjustment or
other revision of the contract price under stated circumstances.
(b) The contract should be awarded only after negotiation of a
billing price that is as fair and reasonable as the circumstances
permit.
16.205-3 Limitations.
This contract type may only be used when--
(a) The contract is for research and development and the estimated
cost is at or below the simplified acquisition threshold (SAT);
(b) The contractor's accounting system is adequate for price
redetermination;
(c) There is reasonable assurance that the price redetermination
will take place promptly at the specified time; and
(d) The head of the contracting activity (or a higher-level
official, if required by agency procedures) approves its use in
writing.
16.205-4 Contract clause.
Insert the clause at 52.216-6, Price Redetermination-Retroactive,
in solicitations and contracts, other than those for commercial
products or commercial services, when a fixed-price contract is
contemplated and the conditions in 16.205-2 and 16.205-3 apply.
16.206 Firm-fixed-price, level-of-effort term contracts.
16.206-1 Description.
A firm-fixed-price, level-of-effort term contract requires--
(a) The contractor to provide a specified level of effort, over a
stated period of time, on work towards a deliverable that can be
described in general terms; and
(b) The Government to pay the contractor a fixed dollar amount for
the effort.
16.206-2 Application.
A firm-fixed-price, level-of-effort term contract is suitable for
investigation or study in a specific research and development area. The
deliverable of the contract is usually a report showing the results
achieved through application of the required level of effort. However,
payment is based on the effort expended rather than on the results
achieved.
16.206-3 Limitations.
This contract type may be used only when--
(a) The work required cannot otherwise be clearly defined;
(b) The required level of effort is identified and agreed upon in
advance;
(c) There is reasonable assurance that the intended deliverable
cannot be achieved by expending less than the stipulated effort; and
(d) The agency head approves a justification if required by 16.104.
Subpart 16.3--Cost-Reimbursement Contracts
16.301 General.
16.301-1 Description.
Cost-reimbursement contracts allow for the reimbursement of
allowable incurred costs. These contracts establish an estimate of
total cost for the purpose of obligating funds and establishing a
ceiling value that the contractor may not exceed (except at its own
risk) without the approval of the contracting officer.
16.301-2 Application.
Use cost-reimbursement contracts only when--
(a) The requirements cannot be sufficiently defined to allow for a
fixed-price type contract; or
(b) Uncertainties involved in contract performance do not permit
costs to be estimated with sufficient accuracy to use any type of
fixed-price contract.
16.301-3 Limitations.
(a) A cost-reimbursement contract may be used only when--
(1) A written acquisition plan has been approved at least one level
above the contracting officer (see 7.102(d));
(2) The agency head approves a justification if required by 16.104;
(3) The contractor's accounting system can adequately segregate,
accumulate and allocate costs specifically attributed to the contract
or order during contract performance; and
(4) Before award of the contract or order, sufficient Government
resources are available to award and manage a contract other than firm-
fixed-priced (see part 7). This includes designating a contracting
officer's representative to monitor contractor performance and cost
controls (see part 1).
(b) The use of cost-reimbursement contracts is not allowed for the
purchase of commercial products and commercial services (see part 12).
16.302 Cost contracts.
A cost contract is a cost-reimbursement contract that does not
include fee.
16.303 Cost-sharing contracts.
A cost-sharing contract is a cost-reimbursement contract that does
not include fee, and the Government
[[Page 59492]]
reimburses only a portion of the allowable costs. State in the contract
the agreed upon portion or percentage of allowable costs that will be
reimbursed.
16.304 Cost-plus-fixed-fee contracts.
16.304-1 Description.
A cost-plus-fixed-fee contract is a cost-reimbursement contract
that includes payment of an agreed upon fixed-fee. The fixed fee does
not change with actual cost but may be adjusted as a result of changes
in the work to be performed under the contract.
16.304-2 Limitations.
A cost-plus-fixed-fee contract must not be awarded unless the
contracting officer complies with all limitations listed at 15.404-9
and 16.301-3.
16.304-3 Completion and term forms.
A cost-plus-fixed-fee contract may take one of two basic forms-
completion or term.
(a) The completion form describes the scope of work by stating a
definite goal or target and specifying an end product. This form of
contract normally requires the contractor to complete and deliver the
specified end product (e.g., a final report of research accomplishing
the goal or target) within the estimated cost, if possible, as a
condition for payment of the entire fixed fee. However, if the work
costs more than estimated, the Government may increase allowable costs
to complete the work without increasing the fee.
(b) The term form describes the scope of work in general terms and
requires the contractor to work at a specified level of effort for a
specific time period. The term form may not be used unless required by
the contract to provide a specific level of effort within a definite
time period. Under this form, if the performance is considered
satisfactory by the Government, the fixed fee is payable at the end of
the agreed upon period. Renewal for further periods of performance is a
new acquisition that involves new cost and fee arrangements.
16.305 Contract clauses.
(a) Insert the clause at 52.216-7, Allowable Cost and Payment, in
solicitations and contracts, other than those for commercial products
or commercial services, when a cost-reimbursement contract, including
cost-type incentive contracts described in subpart 16.4, or a time-and-
materials contract is anticipated. If the contract is a time-and-
materials contract, the clause at 52.216-7 applies in conjunction with
the clause at 52.232-7, Payments under Time-and-Materials and Labor-
Hour Contracts, but only to the portion of the contract that provides
for reimbursement of materials (as defined in the clause at 52.232-7)
at actual cost. The clause at 52.216-7 does not apply to labor-hour
contracts.
(1) Use the clause with its Alternate I for the acquisition of
construction.
(2) Use the clause with its Alternate II if the contract is with an
educational institution.
(3) Use the clause with its Alternate III if the contract is with a
State or local government.
(4) Use the clause with its Alternate IV if the contract is with a
nonprofit organization other than an educational institution, a State
or local government, or a nonprofit organization exempted under the OMB
Uniform Guidance at 2 CFR part 200, appendix VIII.
(b) Insert the clause at 52.216-8, Fixed Fee, in solicitations and
contracts, other than those for commercial products or commercial
services, when a cost-plus-fixed-fee contract (other than a
construction contract) is anticipated.
(c) Insert the clause at 52.216-9, Fixed Fee-Construction, in
solicitations and contracts, other than those for commercial products
or commercial services, when a cost-plus-fixed-fee construction
contract is anticipated.
(d) Insert the clause at 52.216-10, Incentive Fee, in solicitations
and contracts, other than those for commercial products or commercial
services, when a cost-plus-incentive-fee contract is anticipated.
(e)(1) Insert the clause at 52.216-11, Cost Contract-No Fee, in
solicitations and contracts, other than those for commercial products
or commercial services, when a cost-reimbursement contract that
provides no fee and is not a cost-sharing contract is anticipated. This
clause may be modified by substituting $10,000 in lieu of $100,000 as
the maximum reserve in paragraph (b) if the contractor is a nonprofit
organization.
(2) Use the clause with its Alternate I if a cost-reimbursement
research and development contract with an educational institution or a
nonprofit organization that provides no profit and is not a cost-
sharing contract is anticipated, and if the contracting officer
determines that withholding of a portion of allowable costs is not
required.
(f)(1) Insert the clause at 52.216-12, Cost-Sharing Contract-No
Fee, in solicitations and contracts, other than those for commercial
products or commercial services, when a cost-sharing contract is
anticipated. The contracting officer may modify the clause by
substituting $10,000 in lieu of $100,000 as the maximum reserve in
paragraph (b) if the contract is with a nonprofit organization.
(2) Use the clause with its Alternate I if a cost-sharing research
and development contract with an educational institution or a nonprofit
organization is anticipated, and if the contracting officer determines
that withholding of a portion of allowable costs is not required.
(g) Insert the clause at 52.216-15, Predetermined Indirect Cost
Rates, in solicitations and contracts, other than those for commercial
products or commercial services, when a cost-reimbursement research and
development contract with an educational institution (see part 42) is
anticipated and predetermined indirect cost rates are to be used.
Subpart 16.4--Incentive Contracts
16.401 General.
16.401-1 Description.
(a) Incentive contracts are designed to obtain specific acquisition
objectives by--
(1) Establishing realistic and achievable targets that are clearly
communicated to the contractor; and
(2) Including appropriate incentive arrangements designed to--
(i) Motivate contractor efforts that might not otherwise be
emphasized; and
(ii) Discourage contractor inefficiency and waste.
(b) Fixed-price and cost-reimbursement contracts may include
incentives when appropriate.
(c) The two types of incentives are award-fee (16.402) and
predetermined, formula-type incentives based on objective criteria
including performance, delivery, cost, or multiple criteria (16.403,
16.404, and 16.405).
(1) Use objective criteria to the maximum extent practicable to
measure contract performance.
(2) When predetermined, formula-type incentives on technical
performance or delivery are included, profit or fee increases are only
earned when performance exceeds the targets. Decreases apply when
contractors fail to meet these targets. These incentive increases or
decreases relate only to performance targets, not minimum performance
requirements.
(3) Consider use of a multiple-incentive contract containing both
objective incentives and subjective award-fee criteria when objective
criteria exist but it is in the best interest of the Government to also
incentivize subjective elements of performance.
(d) No incentive contract may provide for other incentives without
also providing a cost incentive or constraint.
[[Page 59493]]
16.401-2 Limitations.
(a) A determination and findings, signed by the head of the
contracting activity, must be completed for all incentive- and award-
fee contracts justifying that the use of this type of contract is in
the best interest of the Government. The determination for award-fee
contracts must address all of the suitability items in 16.402-1.
(b)(1) For cost-reimbursement incentive contracts, the agency head
must approve a justification if required by 16.104.
(2) For fixed-price incentive contracts based solely on factors
other than cost, a justification is not required.
16.401-3 Collection and analysis of fee data.
Each agency must collect relevant data on incentive and award fees
paid to contractors and include performance measures to evaluate such
data on a regular basis to determine effectiveness of incentive and
award fees as a tool for improving contractor performance and achieving
desired program outcomes. This information should be considered as part
of the acquisition planning process (see part 7) in determining the
appropriate type of contract to be used for future acquisitions.
16.401-4 Incentive strategy best practices.
Each agency head must provide processes for sharing proven
incentive strategies for the acquisition of different types of products
and services among contracting and program management officials.
16.402 Award-fee.
16.402-1 Application.
An award-fee contract is suitable for use when--
(a) The work to be performed is too complex or uncertain to set
predetermined objective incentive targets applicable to cost, schedule,
and technical performance;
(b) The likelihood of meeting acquisition objectives will be
increased by using a contract that effectively motivates the contractor
toward exceptional performance and provides the Government with the
flexibility to evaluate both actual performance and the circumstances
under which work was achieved; and
(c) Any additional administrative effort and cost required to
monitor and evaluate performance are justified by the expected benefits
as documented by a risk and cost benefit analysis to be included in the
determination and findings referenced in 16.401-2.
16.402-2 Limitations.
(a) Justification for other than fixed-price. For award-fee
contracts, except for fixed-price award-fee contracts based solely on
factors other than cost, the agency head must approve a justification,
if required by 16.104.
(b) Award-fee plan. Do not award an award-fee contract unless an
award-fee plan is completed in accordance with the requirements in
paragraph (d) of this section.
(c) Award-fee amount. The amount of award fee earned must be in
line with the contractor's overall cost, schedule, and technical
performance as measured against contract requirements in accordance
with the criteria stated in the award-fee plan. Award fee must not be
earned if the contractor's overall cost, schedule, and technical
performance in the aggregate is below satisfactory. The basis for all
award-fee determinations must be documented in the contract file to
include, at a minimum, a determination that overall cost, schedule, and
technical performance in the aggregate is or is not at a satisfactory
level. This determination and the approach for determining the award
fee are unilateral decisions made solely at the discretion of the
Government.
(d) Award-fee plan. All contracts providing for award fees must be
supported by an award-fee plan that sets up the process for evaluating
award fee and an Award-Fee Board for completing the award-fee
evaluation. Award-fee plans must--
(1) Be approved by the Fee-Determining Official unless otherwise
authorized by agency procedures;
(2) Identify the award-fee evaluation criteria and how they are
connected to acquisition objectives which must be defined in terms of
contract cost, schedule, and technical performance. Criteria should
motivate the contractor to enhance performance in the areas rated, but
not at the expense of at least minimum acceptable performance in all
other areas;
(3) Describe how the contractor's performance will be evaluated
against the award-fee evaluation criteria;
(4) Use the adjectival rating and associated description as well as
the award-fee pool earned percentages shown in Table 16-1. Contracting
officers may supplement the adjectival rating description. The approach
used to determine the adjectival rating must be documented in the
award-fee plan;
Table 16-1
------------------------------------------------------------------------
Award-fee adjectival Award-fee pool available
rating to be earned Description
------------------------------------------------------------------------
Excellent............... 91%-100%................ Contractor has
exceeded almost all
of the significant
award-fee criteria
and has met overall
cost, schedule, and
technical
performance
requirements of the
contract in the
aggregate as
defined and
evaluated against
the criteria in the
award-fee plan for
the award-fee
evaluation period.
Very Good............... 76%-90%................. Contractor has
exceeded many of
the significant
award-fee criteria
and has met overall
cost, schedule, and
technical
performance
requirements of the
contract in the
aggregate as
defined and
evaluated against
the criteria in the
award-fee plan for
the award-fee
evaluation period.
Good.................... 51%-75%................. Contractor has
exceeded some of
the significant
award-fee criteria
and has met overall
cost, schedule, and
technical
performance
requirements of the
contract in the
aggregate as
defined and
evaluated against
the criteria in the
award-fee plan for
the award-fee
evaluation period.
Satisfactory............ No Greater Than 50%..... Contractor has met
overall cost,
schedule, and
technical
performance
requirements of the
contract in the
aggregate as
defined and
evaluated against
the criteria in the
award-fee plan for
the award-fee
evaluation period.
Unsatisfactory.......... 0%...................... Contractor has
failed to meet
overall cost,
schedule, and
technical
performance
requirements of the
contract in the
aggregate as
defined and
evaluated against
the criteria in the
award-fee plan for
the award-fee
evaluation period.
------------------------------------------------------------------------
[[Page 59494]]
(5) Earning any award fee when a contractor's overall cost,
schedule, and technical performance in the aggregate is below
satisfactory is not allowed;
(6) Provide for evaluation period(s) to be conducted at stated
intervals during the contract period of performance so that the
contractor will periodically be informed of the quality of its
performance and the areas in which improvement is expected (e.g., six
months, nine months, twelve months, or at specific milestones); and
(7) Define the total award-fee pool amount and how this amount is
allocated to each evaluation period.
(e) Rollover of unearned award fee. The use of rollover of unearned
award fee is prohibited.
16.402-3 Fixed-price contracts with award fees.
Award-fee provisions may be used in fixed-price contracts when the
Government wishes to motivate a contractor and other incentives cannot
be used because contractor performance cannot be measured objectively.
Such contracts must establish a fixed-price (including normal profit)
for the work, which will be paid for satisfactory contract performance.
Any award fee earned will be paid in addition to that fixed-price. See
16.402-1 and 16.402-2 for the requirements on using this contract type.
16.402-4 Cost-plus-award-fee contracts.
(a) A cost-plus-award-fee contract is a cost-reimbursement contract
that provides a fee consisting of--
(1) A base amount fixed at inception of the contract, if applicable
and at the discretion of the contracting officer; and
(2) An award fee that the contractor may earn in whole or in part
to provide motivation for excellence in the areas of cost, schedule,
and technical performance.
(b) See 16.301, 16.402-1, and 16.402-2 for the requirements
relative to utilizing this contract type.
16.403 Application of predetermined, formula-type incentives.
16.403-1 Cost incentives.
(a) Cost incentives take the form of a profit or fee adjustment
formula and are intended to motivate the contractor to effectively
manage costs.
(b) Except for award-fee contracts (see 16.402), cost incentive
contracts include a target cost, a target profit or fee, and a profit
or fee adjustment formula that (within the constraints of a price
ceiling or minimum and maximum fee) provides that--
(1) If actual costs equal the target cost, the contractor will earn
the target profit or fee;
(2) If actual costs exceed the target cost, the contractor's earned
profit or fee will be lower than the target profit or fee; and
(3) If actual costs are less than the target cost, the contractor's
earned profit or fee will be higher than the target profit or fee.
(c) See 16.404 for fixed-price cost incentive contracts and 16.405
for cost-reimbursable cost incentive contracts.
16.403-2 Performance incentives.
(a) Performance incentives may be considered in connection with
specific, objectively measurable product characteristics (e.g., a
missile range, an aircraft speed, an engine thrust, or a vehicle
maneuverability) or other specific areas of the contractor's
performance. Incentives should be linked to the contractor's profit or
fee based on how their actual performance compares to the set targets.
(b) To the maximum extent practicable, positive and negative
performance incentives for objectively measured tasks should be
considered when the quality of performance is critical, and incentives
are likely to motivate the contractor.
16.403-3 Delivery incentives.
(a) Delivery incentives should be considered when improvement from
a required delivery schedule is important to the Government.
(b) Delivery incentive contracts should include how the reward-
penalty structure is affected by Government-caused delays or other
delays beyond the control, and without the fault or negligence, of the
contractor or subcontractor.
16.403-4 Structuring multiple-incentive contracts.
A properly structured multiple-incentive arrangement should--
(a) Motivate the contractor to work towards outstanding results in
all incentive areas; and
(b) Encourage trade-offs between incentive areas to align with the
Government's goals. Due to the connection of cost, technical
performance, and delivery goals, a contract that focuses on only one of
the goals may jeopardize control over the others. All multiple-
incentive contracts must include a cost incentive (or constraint) that
prevents rewarding a contractor for greater technical performance or
delivery results when the cost of those results outweighs their value
to the Government.
16.404 Fixed-price cost incentive contracts.
(a) Description. A fixed-price cost incentive contract is a fixed-
price contract that uses an established formula to adjust profit upward
or downward and establishes the final contract price based on actual
costs. Two forms of fixed-price cost incentive contracts based on cost
incentives, firm target and successive targets, are further described
in 16.404-1 and 16.404-2.
(b) Application. A fixed-price cost incentive contract is
appropriate when--
(1) A firm-fixed-price contract is not suitable;
(2) The contractor's acceptance of a degree of cost responsibility
will provide a positive profit incentive to control costs and increase
performance; and
(3) If the contract also includes technical, performance or
delivery incentives, the technical/performance/delivery incentives
should provide opportunities for the incentives to improve the
contractor's management of the work.
(c) Billing prices. In fixed-price cost incentive contracts,
interim billing prices are established for payment. Billing prices may
be adjusted, within the ceiling limit, when requested by either party
to the contract, when it becomes apparent that final price will be
substantially different from the target price.
16.404-1 Fixed-price cost incentive (firm target) contracts.
(a) Description. A fixed-price cost incentive (firm target)
contract specifies a target cost, a target profit, a price ceiling (but
not a profit ceiling or floor), and a formula for profit adjustments.
When the final cost is less than the target cost, application of the
formula results in a final profit greater than the target profit;
conversely, when final cost is more than target cost, application of
the formula results in a final profit less than the target profit, or
even a net loss. If the final negotiated cost exceeds the price
ceiling, the contractor absorbs the difference as a loss.
(b) Limitations. This contract type may be used only when--
(1) The contractor's accounting system is adequate for providing
data to support negotiation of final cost and incentive price revision;
and
(2) Adequate cost or pricing information for establishing
reasonable firm targets is available at the time of initial contract
negotiation.
(c) Contract schedule. Specify in the contract schedule the target
cost, target
[[Page 59495]]
profit, and price ceiling for each item subject to incentive price
revision.
16.404-2 Fixed-price cost incentive (successive targets) contracts.
(a) Description. A fixed-price cost incentive (successive targets)
contract specifies the following elements, all of which are negotiated
at the outset:
(1) An initial target cost.
(2) An initial target profit.
(3) An initial profit adjustment formula to calculate the firm
target profit, including a ceiling and floor for the firm target
profit.
(4) The production point at which the firm target cost and firm
target profit will be negotiated.
(5) A ceiling price.
(b) Limitations. This contract type may be used only when--
(1) The contractor's accounting system is adequate for providing
data for negotiating firm targets and a realistic profit adjustment
formula, as well as later negotiation of final costs; and
(2) Cost or pricing information adequate for establishing a
reasonable firm target cost is expected to be available early on in
contract performance.
(c) Contract schedule. Specify in the contract schedule the initial
target cost, initial target profit, and initial target price for each
item subject to incentive price revision.
16.405 Cost-plus-incentive-fee contracts.
The cost-plus-incentive-fee contract is a cost-reimbursement
contract that adjusts the initially negotiated fee based on a formula
comparing total allowable costs to total target costs. This contract
type includes a target cost, target fee, minimum and maximum fees, and
a fee adjustment formula. After contract performance, the contractor's
fee is determined using the specified fee formula. The formula provides
for fee greater than the target fee when total allowable costs are less
than target costs, and fee less than the target fee when total
allowable costs exceed target costs, creating an incentive for
effective contract management. When total allowable costs fall outside
the range of the fee formula, the contractor receives total allowable
costs plus either the minimum or maximum fee.
16.406 Contract clauses.
(a) Insert the clause at 52.216-16, Incentive Price Revision-Firm
Target, in solicitations and contracts, other than those for commercial
products or commercial services, when a fixed-price cost incentive
(firm target) contract is contemplated. Use the clause with its
Alternate I if the contract calls for supplies or services to be
ordered under a provisioning document or Government option and the
prices are to be subject to the incentive price revision under the
clause.
(b) Insert the clause at 52.216-17, Incentive Price Revision-
Successive Targets, in solicitations and contracts, other than those
for commercial products or commercial services, when a fixed-price cost
incentive (successive targets) contract is contemplated. Use the clause
with its Alternate I if the contract calls for supplies or services to
be ordered under a provisioning document or Government option and the
prices are to be subject to incentive price revision under the clause.
(c) Insert the clause at 52.216-10, Incentive Fee, in solicitations
and contracts, other than those for commercial products or commercial
services, when a cost-plus-incentive-fee contract is contemplated.
(d) Insert an appropriate award-fee clause in solicitations and
contracts, including those for commercial products or commercial
services, when an award-fee contract is contemplated, provided that the
clause--
(1) Is prescribed by or approved under agency acquisition
regulations;
(2) Is compatible with the clause at 52.216-7, Allowable Cost and
Payment; and
(3) Expressly provides that the award amount and the award-fee
determination methodology are unilateral decisions made solely at the
discretion of the Government.
Subpart 16.5--Time-and-Materials and Labor-Hour Contracts
16.500 Scope.
Time-and-materials contracts and labor-hour contracts are not
fixed-price contracts.
16.501 Time-and-materials contracts.
Definitions for the purposes of Time-and-Materials Contracts.
Direct materials means those materials that enter directly into the
end product, or that are used or consumed directly in connection with
the furnishing of the end product or service.
Hourly rate means the rate(s) prescribed in the contract for
payment for labor that meets the labor category qualifications of a
labor category specified in the contract that are--
(1) Performed by the contractor;
(2) Performed by the subcontractors; or
(3) Transferred between divisions, subsidiaries, or affiliates of
the contractor under a common control.
Materials means--
(1) Direct materials, including supplies transferred between
divisions, subsidiaries, or affiliates of the contractor under a common
control;
(2) Subcontracts for supplies and incidental services for which
there is not a labor category specified in the contract;
(3) Other direct costs (e.g., incidental services for which there
is not a labor category specified in the contract, travel, computer
usage charges, etc.); and
(4) Applicable indirect costs.
16.501-1 Description.
A time-and-materials contract provides for acquiring supplies or
services on the basis of--
(a) Direct labor hours at specified fixed hourly rates that include
wages, overhead, general and administrative expenses, and profit; and
(b) Actual cost for materials (except as provided for in part 31).
16.501-2 Application.
A time-and-materials contract may be used only when it is not
possible at the time of placing the contract to estimate accurately the
extent or duration of the work or to anticipate costs with any
reasonable degree of confidence.
(a) Government surveillance. A time-and-materials contract provides
no positive profit incentive to the contractor for cost control or
labor efficiency. Therefore, appropriate Government surveillance of
contractor performance is required to give reasonable assurance that
efficient methods and effective cost controls are being used.
(b) Fixed hourly rates. (1) The contract must specify separate
fixed hourly rates that include wages, overhead, general and
administrative expenses, and profit for each category of labor.
(2) For acquisitions of other than commercial products or
commercial services awarded without adequate price competition (see
part 15), the contract must specify separate fixed hourly rates that
include wages, overhead, general and administrative expenses, and
profit for each category of labor to be performed by--
(i) The contractor;
(ii) Each subcontractor; and
(iii) Each division, subsidiary, or affiliate of the contractor
under a common control.
(3) For contract actions that are not awarded using competitive
procedures, unless exempt under paragraph (b)(4) of this section, the
fixed hourly rates for services transferred between divisions,
subsidiaries, or affiliates of the contractor under a common control--
[[Page 59496]]
(i) Must not include profit for the transferring organization; but
(ii) May include profit for the prime contractor.
(4) For contract actions that are not awarded using competitive
procedures, the fixed hourly rates for services that meet the
definition of ``commercial service'' that are transferred between
divisions, subsidiaries, or affiliates of the contractor under a common
control may be the established catalog or market rate when--
(i) It is the established practice of the transferring organization
to price interorganizational transfers at other than cost for
commercial work of the contractor or any division, subsidiary or
affiliate of the contractor under a common control; and
(ii) The contracting officer has determined the price to be
reasonable.
(c) Material handling costs. When included as part of material
costs, material handling costs must include only costs clearly excluded
from the labor-hour rate. Material handling costs may include all
appropriate indirect costs allocated to direct materials in accordance
with the contractor's usual accounting procedures consistent with part
31.
16.501-3 Limitations.
A time-and-materials contract or order may be used only if--
(a) The contracting officer prepares a determination and findings
that no other contract type is suitable. The determination and findings
must be--
(1) Signed by the contracting officer prior to the execution of the
base period or any option periods of the contracts; and
(2) Approved by the head of the contracting activity prior to the
execution of the base period when the base period plus any option
periods exceeds three years;
(b) The agency head approves a justification if required by 16.104;
and
(c) The contract or order includes a ceiling price that the
contractor exceeds at its own risk. See part 12 for further limitations
on use of time-and-materials or labor-hour contracts for acquisition of
commercial products and commercial services.
16.501-4 Solicitation provisions.
(a) Insert the provision at 52.216-29, Time-and-Materials/Labor-
Hour Proposal Requirements--Other Than Commercial Acquisition With
Adequate Price Competition, in solicitations, other than those for
commercial products or commercial services, when the use of a time-and-
materials or labor-hour type of contract is contemplated, and the price
is expected to be based on adequate price competition. If authorized by
agency procedures, the contracting officer may amend the provision to
make mandatory one of the three approaches in paragraph (c) of the
provision; or to require the identification of all subcontractors,
divisions, subsidiaries, or affiliates included in a blended labor
rate; or both.
(b) Insert the provision at 52.216-30, Time-and-Materials/Labor-
Hour Proposal Requirements--Other Than Commercial Acquisition Without
Adequate Price Competition, in solicitations, other than those for
commercial products or commercial services, when the use of a time-and-
materials or labor-hour type of contract is contemplated if the price
is not expected to be based on adequate price competition.
(c) Insert the provision at 52.216-31, Time-and-Materials/Labor-
Hour Proposal Requirements--Commercial Acquisition, in solicitations
for commercial products or commercial services when a time-and-
materials or labor-hour contract is contemplated.
16.501-5 Postaward requirements.
Prior to an increase in the ceiling price of a time-and-materials
or labor-hour contract or order--
(a) Conduct an analysis of pricing and other relevant factors to
determine if the action is in the best interest of the Government;
(b) Document the decision in the contract or order file; and
(c) When making a change that modifies the general scope of--
(1) A contract, follow the procedures at part 6, 12.102, or 13.101;
(2) An order issued under the Federal Supply Schedules, follow the
procedures at subpart 8.4; or
(3) An order issued under multiple-award task-order contracts and
delivery-order contracts, follow the procedures at 16.607-6.
16.502 Labor-hour contracts.
Description. A labor-hour contract is a variation of the time-and-
materials contract, differing only in that materials are not supplied
by the contractor. See part 12, 16.501-2, and 16.501-3 for application
and limitations for time-and-materials contracts that also apply to
labor-hour contracts.
Subpart 16.6--Indefinite-Delivery Contracts
16.600 Scope.
(a) This subpart prescribes policies and procedures for making
awards of indefinite-delivery contracts and subsequent orders and
establishes a preference for making multiple awards of indefinite-
quantity contracts.
(b) This subpart does not limit the use of other than competitive
procedures authorized by part 6.
(c) See part 19 for procedures to set aside part or parts of
multiple-award contracts for small businesses and to reserve one or
more awards for small business on multiple-award contracts.
(d) The statutory multiple-award preference (see 10 U.S.C. 3403 and
41 U.S.C. 4103) implemented by this subpart does not apply to
architect-engineer contracts subject to the procedures in part 36.
However, agencies are not precluded from making multiple awards for
architect-engineer services using the procedures in this subpart,
provided the selection of contractors and placement of orders are
consistent with part 36.
(e) This subpart does not limit the authority of the General
Services Administration (GSA) to enter into schedule, multiple-award,
or task-order contracts or delivery-order contracts under any other
provision of law. Therefore, GSA regulations and the coverage for the
Federal Supply Schedule program take precedence over this subpart.
16.601 General.
16.601-1 Definitions.
As used in this subpart--
Delivery-order contract means a contract for supplies that does not
procure or specify a firm quantity of supplies (other than a minimum or
maximum quantity) and that provides for the issuance of orders for the
delivery of supplies during the period of the contract.
Task-order contract means a contract for services that does not
procure or specify a firm quantity of services (other than a minimum or
maximum quantity) and that provides for the issuance of orders for the
performance of tasks during the period of the contract.
16.601-2 Policies.
(a) There are three types of indefinite-delivery contracts:
definite-quantity contracts, requirements contracts, and indefinite-
quantity contracts. The appropriate type of indefinite-delivery
contract may be used to acquire supplies or services or both when the
exact times and quantities of future deliveries are not known at the
time of contract award. Pursuant to 10 U.S.C. 3401 and 41 U.S.C. 4101,
requirements contracts and indefinite-quantity contracts are also known
as delivery-order contracts or task-order contracts.
[[Page 59497]]
(b)(1) Indefinite-delivery contracts may provide for any
appropriate cost or pricing arrangement under this part. Cost or
pricing arrangements that provide for an estimated quantity of supplies
or services (e.g., estimated number of labor hours) must comply with
the appropriate procedures of this subpart.
(2) In accordance with 10 U.S.C. 3206(c), for DoD, NASA, and the
Coast Guard--
(i) The contracting officer may choose not to include price or cost
as an evaluation factor for award when a solicitation--
(A) Has an estimated value exceeding the simplified acquisition
threshold;
(B) Will result in multiple-award contracts that are for the same
or similar services; and
(C) States that the Government intends to make an award to each and
all qualifying offerors.
(ii) If the contracting officer chooses not to include price or
cost as an evaluation factor for the contract award in accordance with
paragraph (b)(2)(i) of this section, the contracting officer must
consider price or cost as one of the factors in the selection decision
for each order placed under the contract.
(iii) The exception in paragraph (b)(2)(i) of this section must not
apply to solicitations for multiple-award contracts that provide for
sole source orders pursuant to section 8(a) of the Small Business Act
(15 U.S.C. 637(a)).
(c) Task-order contracts and delivery-order contracts (requirements
contracts and indefinite-quantity contracts) have an ordering period in
which orders may be placed. Individual task and delivery orders have a
period of performance effective for that specific task or delivery
order's scope of work. The effective period of a task-order contract or
delivery-order contract includes the ordering period of the base
contract and any period of performance of task orders beyond the end of
the ordering period, provided the order was issued during the ordering
period.
(1) Limitation on ordering period. In accordance with 10 U.S.C.
3403, for the DoD, NASA, and the Coast Guard, the head of an agency
entering into a task-order contract or delivery-order contract may
provide for the contract to cover any period up to five years and may
extend the contract period for one or more successive periods pursuant
to an option provided in the contract or a modification of the
contract. The total contract period as extended may not exceed 10 years
unless such head of an agency determines in writing that exceptional
circumstances necessitate a longer contract period.
(2) Limitation on ordering period for task-order contracts for
advisory and assistance services.
(i) In accordance with 10 U.S.C. 3405, except as provided for in
paragraphs (c)(2)(ii) and (iii) of this section, the ordering period of
a task-order contract for advisory and assistance services, including
all periods of extensions of the contract under options, modifications
or otherwise, may not exceed 5 years.
(ii) The 5-year limitation does not apply when--
(A) A longer ordering period is specifically authorized by statute;
or
(B) The contract is for an acquisition of supplies or services that
includes the acquisition of advisory and assistance services and the
contracting officer, or other official designated by the head of the
agency, determines that the advisory and assistance services are
incidental and not a significant component of the contract.
(iii) The contracting officer may extend the contract on a sole-
source basis for a period not exceeding 6 months if the contracting
officer, or other official designated by the head of the agency,
determines that--
(A) The award of a follow-on contract is delayed by circumstances
that were not reasonably foreseeable at the time the initial contract
was entered into; and
(B) The extension is necessary to ensure continuity of services,
pending the award of, and commencement of performance under, the
follow-on contract.
16.602 Definite-quantity contracts.
16.602-1 Description.
A definite-quantity contract provides for delivery of a definite
(fixed) quantity of specific supplies or services for a fixed period,
with deliveries or performance to be scheduled at designated locations
upon order. The delivery schedule, location, or both may be flexible or
set, but the total number of items or services to be delivered under
the contract will not change.
16.602-2 Application.
A definite-quantity contract may be used when it can be determined
in advance that--
(a) The exact quantity of supplies or services required during the
contract period is known at the time of award; and
(b) The supplies or services are regularly available or will be
available after a short lead time.
16.603 Requirements contracts.
16.603-1 Description.
A requirements contract provides for filling all actual purchase
requirements of designated Government activities for supplies or
services during a specified ordering period exclusively from one
contractor, with deliveries or performance to be scheduled by placing
orders with the contractor.
16.603-2 Application.
A requirements contract may be appropriate for acquiring any
supplies or services when the Government anticipates recurring
requirements but cannot predetermine the precise quantities of supplies
or services that designated Government activities will need during a
definite period.
16.603-3 Limitations.
(a) No requirements contract in an amount estimated to exceed $150
million (including all options) may be awarded to a single source
unless a determination is executed in accordance with 16.604-3(a)(4).
(b) Limitations on use of requirements contracts for advisory and
assistance services. (1) Except as provided in paragraph (b)(2) of this
section, no solicitation for a requirements contract for advisory and
assistance services exceeding three years and $20 million (including
all options) may be issued unless the contracting officer or other
official designated by the head of the agency determines in writing
that the services required are so unique or highly specialized that it
is not practicable to make multiple awards using the procedures in
16.604-3(b).
(2) The limitation in paragraph (b)(1) of this section does not
apply to a contract for the acquisition of supplies or services that
includes acquisition of advisory and assistance services if the head of
the executive agency entering into the contract determines that, under
the contract, advisory and assistance services are necessarily
incidental to, and not a significant component of, the contract.
16.603-4 Required content.
(a) Requirements contracts obligate the contractor to supply all
the designated Government activities' actual needs, and the designated
Government activities to purchase all their requirements from that
specific contractor, within stated limits of the contract. The contract
must state, if feasible, the maximum limit of the contractor's
obligation to deliver and the Government's obligation to order. The
contract may also set minimum or maximum limits or both on the
[[Page 59498]]
quantities the Government may order under each individual order or over
a specified period of time.
(b) The solicitation and resulting contract must state a realistic
estimated total quantity. This estimated total quantity is not a
representation to an offeror or contractor that the estimate is
guaranteed quantity, or that conditions affecting requirements will
stay the same. The contracting officer should base the estimate on the
most current information available, and may calculate the estimate
based on records of previous requirements and consumption, or by other
means.
(c) When a requirements contract is used to acquire work (e.g.,
repair, modification, or overhaul) on existing items of Government
property, specify in the Schedule that failure of the Government to
furnish such items in the amounts or quantities described in the
Schedule as ``estimated'' or ``maximum'' will not entitle the
contractor to any equitable adjustment in price under the Government
Property clause of the contract.
16.604 Indefinite-quantity contracts.
16.604-1 Description.
(a) An indefinite-quantity contract provides for an indefinite
quantity, within stated limits, of supplies or services. The Government
places orders for individual requirements during the ordering period of
the contract. Quantity limits may be stated as number of units or as
dollar values.
(b) The contract must require the Government to order and the
contractor to furnish at least a stated minimum quantity of supplies or
services. To ensure that the contract is binding, the minimum quantity
must be more than a nominal quantity, but it should not exceed the
amount that the Government is fairly certain to order.
(c) In addition, if ordered, the contractor is required to furnish
any additional quantities, not to exceed the stated maximum. The
contracting officer should establish a reasonable maximum quantity
based on market research, trends on recent contracts for similar
supplies or services, survey of potential users, or any other rational
basis.
(d) The contract may also specify maximum or minimum quantities
that the Government may order under each task or delivery order and the
maximum that it may order during a specific period of time.
16.604-2 Application.
The contracting officer may use an indefinite-quantity contract
when the Government knows what kind of supplies or services it requires
and a certain minimum amount that it expects to require, but does not
know exactly how much will be needed or when during the effective
period. The contracting officer should use an indefinite-quantity
contract only when the Government expects to have ongoing, repeated
requirements for the supplies or services.
16.604-3 Multiple award preference.
(a)(1) Except for indefinite-quantity contracts for advisory and
assistance services (see paragraph (b) of this section), contracting
officers must, to the maximum extent practicable, give preference to
awarding multiple indefinite-quantity contracts under a single
solicitation to different contractors for the same or similar supplies
or services.
(2) Document the decision whether to make multiple awards in the
acquisition plan or contract file. Reasons for deciding that multiple
awards are not in the best interests of the Government include, but are
not limited to--
(i) Only one contractor is capable of providing performance at the
level of quality required because the supplies or services are unique
or highly specialized;
(ii) Based on the contracting officer's knowledge of the market,
more favorable terms and conditions, including pricing, will be
provided if a single award is made;
(iii) The expected cost of administration of multiple contracts
outweighs the expected benefits of making multiple awards;
(iv) The projected orders are so integrally related that only a
single contractor can reasonably perform the work;
(v) The total estimated value of the contract is at or below the
SAT.
(3) The contracting officer may determine that a class of
acquisitions is not appropriate for multiple awards.
(4)(i) No task-order contract or delivery-order contract in an
amount estimated to exceed $150 million (including all options) may be
awarded to a single source unless the head of the agency determines in
writing that--
(A) The task or delivery orders expected under the contract are so
integrally related that only a single source can reasonably perform the
work;
(B) The contract provides only for firm-fixed-price (see 16.202)
task or delivery orders for--
(1) Products for which unit prices are established in the contract;
or
(2) Services for which prices are established in the contract for
the specific tasks to be performed;
(C) Only one source is qualified and capable of performing the work
at a reasonable price to the Government; or
(D) It is necessary in the public interest to award the contract to
a single source due to exceptional circumstances.
(ii) The head of the agency must notify Congress within 30 days
after any determination under paragraph (a)(4)(i)(D) of this section.
(iii) The requirement for a determination for a single-award
contract greater than $150 million--
(A) Is in addition to any applicable requirements of part 6; and
(B) Is not applicable for architect-engineer services awarded
pursuant to part 36.
(b) Preference for multiple awards for advisory and assistance
services. (1) In accordance with 10 U.S.C. 3405 and 41 U.S.C. 4105,
except as provided in paragraph (b)(2) of this section, if an
indefinite-quantity contract for advisory and assistance services is
estimated to exceed 3 years and $20 million (including all options),
the solicitation must provide for multiple awards unless--
(i) The contracting officer or other official designated by the
head of the agency determines in writing--
(A) It is not practicable to award more than one contract because
the services required are unique or highly specialized or the tasks are
so integrally related; or
(B) After the evaluation of offers, that only one offeror is
capable of providing the services required at the level of quality
required; or
(ii) Only one offer is received.
(2) The requirements of paragraph (b)(1) of this section do not
apply to a contract for the acquisition of supplies or services that
includes acquisition of advisory and assistance services if the head of
an agency entering into such contract determines in writing during
acquisition planning that, under the contract, advisory and assistance
services are necessarily incident to, and not a significant component
of, the contract.
16.604-4 On-ramps and off-ramps.
To maintain a current, competitive, and innovative pool of vendors
on a multiple-award contract, the solicitation and contract may provide
for--
(a) Adding one or more new contractors (on-ramp) and increasing the
maximum quantity during open seasons; and
(b) Removing a contractor (off-ramp) for underperforming, failure
to actively participate in order competitions, other circumstances
defined in the contract, or if requested by the contractor.
[[Page 59499]]
16.604-5 Required content.
An indefinite-quantity solicitation and contract must--
(a) Specify the ordering period of the contract, including the
number of options and the period for which the Government may extend
the contract ordering period under each option;
(b) Specify the total minimum and maximum quantity of supplies or
services the Government will acquire under the contract;
(c) Specify the last date that a contractor will be required to
make deliveries under orders issued during the ordering period (see
52.216-22(d));
(d) Include a statement of work, specifications, or other
description that reasonably describes the general scope, nature,
complexity, and purpose of the supplies or services the Government will
acquire under the contract in a manner that will enable a prospective
offeror to decide whether to submit an offer;
(e) State any uniform ordering procedures that the Government will
use in issuing all orders, including the ordering media; otherwise, the
ordering procedures are at the discretion of the ordering contracting
officer;
(f) Specify the activities authorized to issue orders;
(g) Include authorization for placing oral orders, if appropriate,
provided that the Government has established procedures for obligating
funds and that oral orders are confirmed in writing; and
(h) When multiple awards are anticipated--
(1) Specify any fair opportunity procedures and selection criteria
that must apply to all competed orders; otherwise, the procedures and
selection criteria are at the discretion of the ordering contracting
officer (see 16.607);
(2) Specify whether one or more blanket purchase agreements (BPAs)
may be established under the contract according to 16.607-2(c)(3);
(3) Advise whether the Government reserves the right to conduct on-
ramps, off-ramps, or both according to 16.604-4. Specify details of
contemplated on-ramps and off-ramps. If the ordering period exceeds
five years, provide for on-ramps according to 16.604-4, unless the
contracting officer documents that on-ramps are not in the best
interests of the Government.
16.605 Solicitation provisions and contract clauses.
(a) Insert the clause at 52.216-18, Ordering, in solicitations and
contracts, including those for commercial products or commercial
services, when a definite-quantity contract, a requirements contract,
or an indefinite-quantity contract is contemplated.
(b) Insert a clause substantially the same as the clause at 52.216-
19, Order Limitations, in solicitations and contracts, including those
for commercial products or commercial services, when--
(1) A definite-quantity contract, a requirements contract, or an
indefinite-quantity contract is contemplated;
(2) The contracting officer desires maximum or minimum quantities
that the Government may order under each task or delivery order; and
(3) When the Government desires to have a maximum that may be
ordered over a specific period of time.
(c) Insert the clause at 52.216-20, Definite Quantity, in
solicitations and contracts, including those for commercial products or
commercial services, when a definite-quantity contract is contemplated.
(d)(1) Insert the clause at 52.216-21, Requirements, in
solicitations and contracts, including those for commercial products or
commercial services, when a requirements contract is contemplated.
(2) Use the clause with its Alternate I if the contract is for
nonpersonal services and related supplies and covers estimated
requirements that exceed a specific Government activity's internal
capability to produce or perform.
(3) Use the clause with its Alternate II if the contract includes
subsistence for both Government use and resale in the same Schedule and
similar products may be acquired on a brand-name basis (but see
paragraph (d)(5) of this section if the contract also involves a
partial small business set-aside).
(4) Use the clause with its Alternate III if the contract involves
a partial small business set-aside (but see paragraph (d)(5) of this
section if the contract also includes subsistence for Government use
and resale in the same schedule and similar products may be acquired on
a brand-name basis).
(5) Use the clause with its Alternate IV if the contract--
(i) Includes subsistence for Government use and resale in the same
schedule and similar products may be acquired on a brand-name basis;
and
(ii) Involves a partial small business set-aside.
(e) Insert the clause at 52.216-22, Indefinite Quantity, in
solicitations and contracts, including those for commercial products or
commercial services, when an indefinite-quantity contract is
contemplated.
(1) Use the clause with a paragraph substantially the same as its
Alternate I if off-ramping is contemplated and the agency desires a
unilateral cancellation executable by either party. The contracting
officer may vary the 30-day period in which the cancellation becomes
effective from as few as 15 days to as many as 90 days.
(2) Use the clause with a paragraph substantially the same as its
Alternate II if off-ramping is contemplated and the agency wishes to
retain discretion to disapprove contractor-requested off-ramps. The
contracting officer may vary the 30-day period in which the
cancellation becomes effective from as few as 15 days to as many as 90
days.
(f) Insert the provision at 52.216-27, Single or Multiple Awards,
in solicitations for indefinite-quantity contracts, including those for
commercial products or commercial services, that may result in multiple
contract awards. Modify the provision to specify the estimated number
of awards. Do not use this provision for advisory and assistance
services contracts that exceed 3 years and $20 million (including all
options).
(g) Insert the provision at 52.216-28, Multiple Awards for Advisory
and Assistance Services, in solicitations if the acquisition value
exceeds $20 million (including all options), for task-order contracts
for advisory and assistance services that exceed 3 years, including
those for commercial services, unless a determination has been made
under 16.604-3(b)(1)(i). Modify the provision to specify the estimated
number of awards.
(h) Insert the clause at 52.216-32, Task-Order and Delivery-Order
Ombudsman, in solicitations and contracts, including those for
commercial products or commercial services, when a multiple-award task-
order contract or delivery-order contract is contemplated.
(1) Use the clause with its Alternate I when the contract will be
available for use by multiple agencies (e.g., Governmentwide
acquisition contracts or multi-agency contracts).
(2) Use the clause with its Alternate I, and complete paragraph
(d)(2), in the notice of intent to place an order and the resulting
order, when placing orders under the multiple-award contract available
for use by multiple agencies.
16.606 Postaward procedures for placement of task and delivery orders.
(a) Orders must be within the scope, issued within the specified
ordering period, and be within the maximum value of the contract.
(b) All orders placed under a task-order contract or delivery-order
contract must contain the following information:
(1) Date of order.
[[Page 59500]]
(2) Contract number and order number.
(3) For supplies and services, line-item number, subline item
number (if applicable), description, quantity, and unit price or
estimated cost and fee (as applicable). The corresponding line-item
number and subline item number from the base contract must also be
included.
(4) Delivery or performance schedule.
(5) Statement of work that clearly specifies all requirements. For
service orders, performance-based acquisition methods must be used to
the maximum extent practicable (see subpart 37.1).
(6) Place of delivery or performance (including consignee).
(7) Any packaging, packing, and shipping instructions.
(8) Accounting and appropriation data.
(9) Method of payment and payment office, if not specified in the
contract or BPA (see part 32).
(10) North American Industry Classification System code (see part
19).
(c) Orders placed under a task-order contract or delivery-order
contract awarded by another agency (i.e., a Governmentwide acquisition
contract, or multi-agency contract)--
(1) Are not exempt from the development of acquisition plans (see
part 7), and an information technology acquisition strategy (see part
39);
(2) May not be used to circumvent conditions and limitations
imposed on the use of funds (e.g., 31 U.S.C. 1501(a)(1)); and
(3) Must comply with all FAR requirements for a consolidated or
bundled contract when the order meets the definition at 2.101 of
``consolidation'' or ``bundling''.
(d) In accordance with section 1427(b) of Public Law 108-136 (40
U.S.C. 1103 note), orders placed under multi-agency contracts for
services that substantially or to a dominant extent specify performance
of architect-engineer services, as defined in 2.101, must--
(1) Be awarded using the procedures at part 36.
(2) Require the direct supervision of a professional architect or
engineer licensed, registered, or certified in the State, possession,
Federal District, or outlying area in which the services are to be
performed.
(e) When using the Governmentwide commercial purchase card as a
method of payment, orders at or below the micro-purchase threshold are
exempt from verification in the System for Award Management as to
whether the contractor has a delinquent debt subject to collection
under the Treasury Offset Program.
(f) If the contract or BPA did not establish the price for the
supply or service, establish prices for each order using the policies
and methods in subpart 15.4 or part 12, as applicable.
(g) For additional requirements for cost-reimbursement orders, see
subpart 16.3.
(h) For additional requirements for time-and-materials or labor-
hour orders, see subpart 16.5.
(i) The contracting officer should rely on the small business
representations at the contract level (but see part 19 for order
rerepresentations).
16.607 Additional ordering procedures for multiple-award contracts.
These procedures apply to placing orders and establishing BPAs
against multiple-award contracts. See 16.607-2(c)(3)(iv)(B) and (vii)
for placing orders against BPAs.
16.607-1 Placement of orders valued at or below the micro-purchase
threshold.
Each order or BPA valued at or below the micro-purchase threshold
may be placed with any multiple-award contractor that can meet the
agency's needs. Although not required to solicit from a specific number
of contractors, ordering activities should attempt to distribute orders
and BPAs among multiple-award contractors.
16.607-2 Fair opportunity procedures.
(a) Fair opportunity. (1) Provide each awardee a fair opportunity
to be considered for each order or BPA exceeding the micro-purchase
threshold according to paragraph (c) of this section and 16.607-3
through 16.607-5, unless a sole source order or BPA is justified and
approved according to 16.607-6.
(2) The contracting officer has broad discretion to develop
appropriate order or BPA placement procedures. To maximize efficiency,
ordering activities are encouraged to use innovative approaches when
placing orders and establishing BPAs commensurate with the risk and
complexity of the requirement. To solicit orders and BPAs against
indefinite-quantity contracts, issue an order or BPA solicitation
(e.g., request for quotation, request for proposal, or request for task
plan).
(3) The contracting officer should keep submission requirements to
a minimum. The ordering process is not subject to the competition
requirements in part 6 or the policies in subpart 15.2 or part 14. The
contracting officer may use streamlined procedures, including oral
presentations. The contracting officer is not required to have
evaluation plans, score offeror responses, or establish a competitive
range before communicating with contractors competing for an order or
soliciting revised responses to the order or BPA solicitation.
(4) See part 19 for procedures to set aside orders or BPAs for
small businesses under multiple-award contracts.
(b) Task-order and delivery-order ombudsman. The head of the agency
must designate a task-order and delivery-order ombudsman. The ombudsman
must review complaints from contractors and ensure they are afforded a
fair opportunity to be considered, consistent with the procedures in
the contract. The ombudsman must be a senior agency official who is
independent of the contracting officer and may be the agency's advocate
for competition.
(c) Procedures.
(1) Requirements.
(i) Do not use any method (such as allocation or designation of any
preferred awardee) that would not result in fair consideration being
given to all awardees prior to placing each order.
(ii) Tailor the procedures to the risk and complexity of each
acquisition.
(iii) Include the procedures in the order or BPA solicitation.
(iv) Consider price or cost under each order as one of the factors
in the selection decision.
(v) Except for DoD, document in the contract file a justification
for use of the lowest price technically acceptable source selection
process, including an explanation that the criteria at 15.102-2(c)(1)
are met.
(vi) Except for DoD, avoid using the lowest price technically
acceptable source selection process to acquire certain supplies and
services in accordance with 15.102-2(c)(2).
(2) Considerations. The contracting officer should consider the
following when developing the placement procedures:
(i) Past performance on earlier orders under the contract,
including quality, timeliness, and cost control. When past performance
under the multiple-award contract is available and sufficient, it is
unnecessary to consider past performance under other efforts.
(ii) Potential impact on other orders placed with the contractor.
(iii) Minimum order requirements.
(iv) The amount of time contractors need to make informed business
decisions on whether to respond to order or BPA solicitations.
(v) Whether contractors could be encouraged to respond to order or
BPA solicitations by outreach efforts to promote exchanges of
information, such as--
[[Page 59501]]
(A) Seeking comments from two or more contractors on draft
statements of work;
(B) Using a multiphase approach when effort required to respond to
a potential order or BPA solicitation may be resource intensive (e.g.,
requirements are complex or need continued development), where all
contractors are initially considered on price considerations (e.g.,
rough estimates), and other considerations as appropriate (e.g.,
proposed conceptual approach, past performance).
(3) Blanket purchase agreements. If authorized in the multiple-
award contract according to 16.604-5(h)(2), the contracting officer may
establish one or more BPAs to fill anticipated repetitive needs for
supplies or services. Establish BPAs using the fair opportunity
procedures at 16.607-3 through 16.607-5, based on the total estimated
value of the BPA. BPAs must include--
(i) Sufficient detail about the need, such as scope of work or
objectives;
(ii) An ordering period, inclusive of any options or award terms.
BPAs may be established with an ordering period that extends beyond the
current term of a contractor's multiple-award contract, so long as
there are option periods in the contractor's contract that, if
exercised by the administering contracting officer, will cover the
BPA's ordering period, including options and award terms;
(iii) Ordering activity requirements (e.g., invoicing, delivery,
and discounts/other concessions) that are not otherwise included in the
master multiple-award contract;
(iv) Ordering procedures that--
(A) Identify the customers/individuals authorized to place orders
and any limitations surrounding the placement of orders; and
(B) For multiple-award BPAs, ensure that for each order BPA
recipients are provided the fair opportunity procedures in 16.607-3
through 16.607-5, based on the total estimated value of the order;
(v) On-ramps according to 16.604-4 if the ordering period of the
BPA exceeds five years, unless the contracting officer documents that
on-ramps are not in the best interest of the Government.
(vi) On an annual basis or prior to exercise of an option or award
of an award term, review and prepare a written determination providing
that--
(A) The BPA still represents the best value;
(B) Estimated quantities/amounts have been reached or exceeded;
(C) The BPA ordering procedures are being followed;
(D) Additional price discounts or other concessions can be
obtained; and
(E) The ordering period of the contract against which the BPA is
established is still in effect.
(vii) When placing orders against a multiple-award indefinite-
delivery BPA, follow the ordering procedures established by the BPA.
16.607-3 Orders exceeding the micro purchase threshold but not more
than the SAT.
(a) Fairly consider all contractors offering the supplies or
services. If information available to the contracting officer allows
each contractor to be fairly considered, the contracting officer may
place an order without further soliciting contractors, or by soliciting
fewer than all contractors.
(b) Document the file to the extent necessary to support the award
decision, such as demonstrating that each contractor was fairly
considered.
16.607-4 Orders exceeding the SAT but not more than $7.5 million.
(a) Definition. Day, as used in this section, has the meaning set
forth at subpart 33.1.
(b) Notice. Provide a fair notice of the intent to place an order
to all contractors offering the products or services by issuing--
(1) A solicitation including a description of the work to be
performed and the basis on which selection will be made; or
(2) A notice of intent to place an order that requires contractors
to respond in order to receive the solicitation or be considered for
the order.
(c) Award decision documentation. Document the file to the extent
necessary to support the award decision, such as demonstrating that
each quotation, offer, proposal, or other response to a notice was
fairly considered.
(d) Postaward notice. Within 7 days after the award of the order,
provide written notice to all of the contractors who competed, but were
not awarded the order. At a minimum, the notice must provide the name
of the awardee of the order and the total price of the order.
(e) Explanation. If the agency receives a written request within 3
days of the contractor receiving the notification of award in paragraph
(d), provide a brief explanation of why the offeror was not selected.
The explanation must include--
(1) A summary of the rationale for the award; and
(2) An evaluation of the significant weaknesses or deficiencies in
the contractor's offer.
(f) Explanation documentation. Retain a record of the brief
explanation in the task order or delivery order file.
16.607-5 Orders exceeding $7.5 million.
(a) Procedures. Provide a fair notice of the intent to place an
order to all contractors offering the products or services according to
16.607-4(b). A fair notice must--
(1) Include a clear statement of the agency's requirements;
(2) Allow for a reasonable response period; and
(3) Disclose the significant factors and subfactors, as applicable,
including cost or price, that the agency expects to consider in
evaluating quotations, offers, or other responses to notices, and their
relative importance;
(b) Documentation. Document the file to the extent necessary to
support the award decision, such as demonstrating--
(1) That each quotation, offer, or other response to a notice was
fairly considered; and
(2) When award is made using tradeoffs, the relative importance of
quality and price or cost factors.
(c) Postaward notices and debriefings. Provide postaward
notifications and debriefings according to part 15. A summary of the
debriefing must be included in the task or delivery order file.
16.607-6 Exceptions to fair opportunity.
(a) Procedures. Orders placed and BPAs established against
multiple-award contracts are exempt from the competition requirements
in part 6. However, justify placing an order or BPA exceeding the
micro-purchase threshold (MPT) on a sole source basis in accordance
with this section.
(b) Exceptions. An order or a BPA exceeding the MPT may be placed
on a sole source basis when:
(1) The agency need for the supplies or services is so urgent that
providing a fair opportunity would result in unacceptable delays;
(2) Only one awardee is capable of providing the supplies or
services required at the level of quality required because the supplies
or services ordered are unique or highly specialized;
(3) The order or BPA must be issued on a sole-source basis in the
interest of economy and efficiency because it is a logical follow-on to
an order or BPA already issued under the contract, provided that all
awardees were given a fair opportunity to be considered for the
original order or BPA;
(4) It is necessary to satisfy a minimum guarantee;
(5) For orders exceeding the SAT, or BPAs expected to exceed the
SAT, a
[[Page 59502]]
statute expressly authorizes or requires that the purchase be made from
a specified source; or
(6) For DoD, NASA, and the Coast Guard, the order or BPA satisfies
one of the exceptions permitting the use of other than full and open
competition listed in 6.103 (10 U.S.C. 3406(c)(5)). Do not use the
public interest exception unless Congress is notified in accordance
with 10 U.S.C. 3204(a)(7).
(c) Small business considerations. Part 19 and Public Law 111-240
(15 U.S.C. 644(r)) provide authority for setting aside orders and
placing orders under reserves, which are not subject to the
justification, approval, and posting requirements in paragraphs (d)-(f)
of this section.
(d) Justification. The justification for an exception to fair
opportunity must be in writing and include the following:
(1) Orders exceeding the micro-purchase threshold but not more than
the SAT. Document the basis for using an exception to the fair
opportunity process. For the logical follow-on exception, the rationale
must describe why the relationship between the initial order and the
follow-on is logical (e.g., in terms of scope, period of performance,
or value).
(2) Orders exceeding the SAT. As a minimum, each justification must
include the following information:
(i) Identification of the agency and the contracting activity, and
specific identification of the document as a ``Justification for an
Exception to Fair Opportunity.''
(ii) Nature or description of the action being approved.
(iii) A description of the supplies or services required to meet
the agency's needs (including the estimated value).
(iv) Identification of the exception to fair opportunity (see
paragraph (b) of this section) and the supporting rationale, including
a demonstration that the proposed contractor's unique qualifications or
the nature of the acquisition requires use of the exception cited. If
the contracting officer uses the logical follow-on exception, the
rationale must describe why the relationship between the initial order
and the follow-on is logical (e.g., in terms of scope, period of
performance, or value).
(v) A determination by the contracting officer that the anticipated
cost to the Government will be fair and reasonable.
(vi) Any other facts supporting the justification.
(vii) A statement of the actions, if any, the agency may take to
remove or overcome any barriers that led to the exception to fair
opportunity before any subsequent acquisition for the supplies or
services is made.
(viii) The contracting officer's certification that the
justification is accurate and complete to the best of the contracting
officer's knowledge and belief.
(ix) Evidence that any supporting data that is the responsibility
of technical or requirements personnel (e.g., verifying the
Government's minimum needs or requirements or other rationale for an
exception to fair opportunity) and which form a basis for the
justification have been certified as complete and accurate by the
technical or requirements personnel.
(x) A written determination by the approving official that one of
the circumstances in paragraphs (b)(1) through (6) of this section
applies to the order.
(e) Approval. The justification for an exception to fair
opportunity must be approved in writing by the following official, or
an official with a higher approval authority in Table 16-2:
Table 16-2--Approval Authorities for Exceptions to Fair Opportunity
------------------------------------------------------------------------
Value (including options) Approval authority
------------------------------------------------------------------------
(1) $900,000 or less................... Contracting officer.
Accomplished by certification
required at 16.607-
6(d)(2)(viii).
(2) >$900,000-$20,000,000.............. Advocate for competition of the
activity placing the order.
Not delegable.
(3) >$20,000,000-$90,000,000 The head of the procuring
(>$20,000,000-$150,000,000 for DoD, activity placing the order.
NASA, and USCG). May be delegated to a general
or flag officer of the armed
forces or a civilian in a
grade above GS-15 (or in a
comparable or higher position
under another schedule).
(4) >$90,000,000 (>$150,000,000 for Senior procurement executive of
DoD, NASA, and USCG). the agency placing the order.
Not delegable, except in the
case of the Under Secretary of
Defense for Acquisition and
Sustainment, acting as the
senior procurement executive
for the Department of Defense.
------------------------------------------------------------------------
(f) Posting. (1) Except as provided in paragraph (f)(4), within 14
days after placing an order or establishing a BPA exceeding the SAT on
a sole source basis according to paragraph (b)--
(i) Publish a notice to the Governmentwide Point of Entry (GPE);
and
(ii) Post the justification required by paragraph (d)(2) for a
minimum of 30 days--
(A) At the GPE <a href="https://www.sam.gov">https://www.sam.gov</a>; and
(B) On the website of the agency, which may provide access to the
justifications by linking to the GPE.
(2) In the case of an order permitted under paragraph (b)(1) of
this section, the justification must be po
[…truncated; see source link]Indexed from Federal Register on September 18, 2026.
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