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FAR and DFARS › FAR Part 16: Types of Contracts › Subpart 16.4

FAR 16.402-4 Structuring multiple-incentive contracts.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains how multiple-incentive contracts should be structured. A properly structured arrangement should motivate outstanding results across all incentive areas and force trade-off decisions that match the Government's overall acquisition objectives. Because cost, technical performance, and delivery goals are interdependent, every multiple-incentive contract must include a cost incentive or constraint so a contractor is not rewarded for superior technical or delivery results when their cost outweighs their value to the Government.

Applies to: Multiple-incentive contracts and the contractors performing them

What it requires

  • Include a cost incentive or constraint in every multiple-incentive contract
  • Ensure the cost incentive or constraint precludes rewarding superior technical performance or delivery results when their cost outweighs their value to the Government

Key terms: multiple-incentive contract · cost incentive · constraint · incentive areas · trade-off decisions

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

A properly structured multiple-incentive arrangement should—

(a) Motivate the contractor to strive for outstanding results in all incentive areas; and

(b) Compel trade-off decisions among the incentive areas, consistent with the Government's overall objectives for the acquisition. Because of the interdependency of the Government's cost, the technical performance, and the delivery goals, a contract that emphasizes only one of the goals may jeopardize control over the others. Because outstanding results may not be attainable for each of the incentive areas, all multiple-incentive contracts must include a cost incentive (or constraint) that operates to preclude rewarding a contractor for superior technical performance or delivery results when the cost of those results outweighs their value to the Government.

← 16.402-3 Delivery incentives. · 16.403 Fixed-price incentive contracts. →

Rule changes for FAR Part 16

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 16.402-4 Structuring multiple-incentive contracts · SpendQuery