If you want to win more government contracts, start bidding on them. In 2019 the US Federal Government has spent $597bn on contracts, which shows that the requirement for contractors is increasing.
But before you bid for a particular contact, it is also essential to know about the types of government contracts. These contracts are also helpful for you in the growth of your business. It falls under five different categories; each has different requirements and risks to the contractor.
Types of Federal Government Contract
When you understand the type of government contract, you also know about the federal contracting opportunity. To assist your efforts, here we will discuss the most common types of government contracts and what they require:
Fixed-Price Contracts
These contracts are the most common type of contract that requests at the local and state level. In fixed-price contracts, the federal government asks contractors to present an offer at which the project will complete.
These types of contracts are not subject to any adjustment unless certain provisions like changes in the price and contracts are included in the original agreement. If standards, deliverables, and other measures are not clear, then the risk in these contracts will increase. Most of the federal agencies use fixed-price contracts for long-term projects.
When you accurately plan and forecast the expenditure, it will result in a positive return on your investment.
Cost-Reimbursement Contracts
Cost reimbursement contracts allow a contractor to look for reimbursement for the cost that they have incurred to an agreed allowance. In this case, there will be upfront cost estimates that the contractor cannot exceed without prior to the approval of the federal agency.
Till the time costs do not go beyond the prizes discussed prior to starting the project, the contractor can ask for reimbursement for those expenses. When there are uncertainties in a tender and cannot upfront with complete accuracy at that time the government goes for these types of contracts.
Agencies that use these types of government contracts are National Weather Services, Federal Transit Administration, and the US Department of Defense.
Cost-Plus Contracts
These contacts are preferable where rather than cost, the final quality of the project matters. They have low risk as compared to the fixed-price contracts. So, the profit margin in this is also less, and if you want to win the bid, you must offer a competitive price. This is a great way to grow your contracting business.
Time and Materials Contracts
These contracts come in between fixed-price and cost-reimbursement contracts. In this, the risk is more on the shoulders of the government in comparison to the contractor.
Time and material contracts are preferable when it is difficult to determine an accurate timeline or cost for a project at the time of proposing tender. Here, management pays you for the services by the hour that includes both your fees and profit.
Indefinite Delivery and Quantity Contracts
These types of contacts are generally preferable where the government agencies do not know about the exact quantities of a supply they need for the project. And when they are not aware of the exact time period for how long they need a contractor to give their services.
Final Words
Hopefully, now you know all types of Federal Government contracts. The key to having a successful proposal is to understand all the basic requirements of the contract for which you are competing. Make sure that your solution, execution process, and timeline fit the pricing strategies for bidding.
