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    Government Contracting Database

    Cost-Reimbursement Contracts

    A cost-reimbursement contract may only be used when:(a) The contractor’s accounting system is adequate for determining costs applicable to the contract; (b) Appropriate government surveillance during performance will provide reasonable assurance that efficient methods and effective cost controls are used; and(c) a determination and findings has been executed, in accordance with agency procedures, showing that (1) this contract type is likely to be less costly than any other type, or (2) it is impractical to obtain supplies or services of a kind or quality required without the use of this contract type. In construction contracting, the cost-plus-fixed-fee contract is virtually the only cost reimbursement contract which has been employed. Under this contract type, the contractor is paid a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost but may be adjusted as a result of changes in the work to be performed under the contract. This contract type permits contracting for efforts that might otherwise present too great a risk to contractors, but it provides the contractor with only a minimum incentive to control costs. (FAR 16.306). The other types of cost contracts, including cost-sharing contracts, cost-plus-incentive-fee contracts, and cost-plus-award-fee contracts are generally not found in construction contracts.

    Updated: July 24, 2018

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