Business, Legal & Accounting Glossary
Each business day, the Department of Defense posts information about contracts valued at $6.5 million or more. The language can be a bit dense and jargon-filled. We’ve put together the following for Foolish investors who want more insight on some of the terms governing those contracts.
A good place to start is the Federal Acquisition Regulation (FAR); Part 16 goes over the types of contracts the Department of Defense issues.
Here is some selected information from the FAR that may help investors understand the contracts their companies are getting.
Contract types are grouped into two broad categories: fixed-price contracts (see subpart 16.2) and cost-reimbursement contracts (see subpart 16.3). In between are various incentive contracts (see subpart 16.4).
Fixed-price contracts include:
Cost-reimbursement contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer. These types of contract include:
The FAR provides for several types of incentive contracts that can be based on cost, performance, delivery, or other targets. (16.401) Incentives can be combined with fixed-price and cost-reimbursement contracts.
A delivery-order contract is a contract for supplies that does not specify a firm quantity (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. A task-order contract is the same thing, but for services, rather than supplies. (16.501-1)
There are three types of indefinite-delivery contracts:
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Defense Department Contracts are sourced/syndicated and enhanced from:
This glossary post was last updated: 5th August, 2021 | 0 Views.