While the government is engaged with other governments and entities, it enters into contractual relations with them. A governmental contract is a promise or a set of promises for the breach of which the law provides a remedy, or the performance of which the law in some way recognizes as a duty, that consists of an offer and an acceptance made by competent parties, and a valid (legal and valuable) consideration.
There are several government contracting types, which include fixed price contracts (fixed other than fixed fee and firm fixed price), simplified acquisitions, sealed bidding, and contracting negotiations.
Also FAR Part 16 states that the types of governmental contracts include financial set-ups and administrative set-up options.
The firm fixed price contracts are agreements where parties consent with regard to the price to be paid, regardless of cost performance. The fixed price with other than fixed fee contracts are the agreements where the target cost is consented to and calculated depending on the contract performance with the view of final payment determination. Thus, there are certain types of fees paid in the fixed price with other than fixed fee contracts, like incentive fee, award fee, economic price adjustments, and prospective price pre-determination fee.
Reimbursement contracts, also referred to as cost contracts, involve such transactions as payment of incurred cost and a fee. It can be ended at any time by the government, and the contractor does not have any requirements or authorization to exceed the funding limit established by the government. Among such contracts are cost sharing, cost plus incentive fee, cost plus award fee, and cost plus fixed fee.
Sometimes, when either of the necessary contract elements are not met, the government might put into place a special document which is sort of a substitute of a contract. There are three types of such documents, namely agreements, indefinite delivery, and letter contracts. An agreement is considered to be in a written form. It is a letter of understanding that contemplates separate future contracts or delivery orders. Indefinite delivery contracts provide for negotiation of terms and conditions, prices, quantities and time in advance, without the government being obliged to comply by them precisely. Finally, a letter contract is a written preliminary contractual instrument, which allows the contractor to start performance immediately, and must have a provision regarding maximum governmental liability.
While choosing a type of a contract to enter into with the government, the parties usually consult with the road map of processes. They select a project, do market research, decide whether the parties under the agreement are going to carry commercial or non-commercial activities, and eventually conduct acquisition planning. Further, the government would usually make a purchase request, after which solicitation preparation and source selections planning will be conducted, followed by synopsis and a solicitation release as a result. As a result, the parties will consent upon the closing date, and evaluate the terms and conditions of the agreement in the process of discussions and negotiations, until a final proposal is out there. After the final …