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48 CFR · Federal Acquisition Regulation and Defense supplement

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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.

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116 sections with “incentive contracts”: the first 40

  • FAR 16.402-4 Structuring multiple-incentive contracts.
    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 Governmen…
  • FAR 16.403 Fixed-price incentive contracts.
    (a) Description. A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by application of a formula based on the relationship of total final negotiated cost to…
  • FAR 49.115 Settlement of terminated incentive contracts.
    (a) Fixed-price incentive contracts. The TCO shall settle terminated fixed-price incentive (FPI) contracts under the provisions of paragraph (j) of the clause at 52.216-16, Incentive Price Revision—Firm Target, and 52.249-2, Termination for…
  • FAR 16.204 Fixed-price incentive contracts.
    A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost. Fixed-price …
  • FAR 16.405 Cost-reimbursement incentive contracts.
    See 16.301 for requirements applicable to all cost-reimbursement contracts, for use in conjunction with the following subsections.
  • DFARS 216.403 Fixed-price incentive contracts.
  • DFARS 216.405 Cost-reimbursement incentive contracts.
  • FAR 16.304 Cost-plus-incentive-fee contracts.
    A cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. Cost-plus-incentiv…
  • FAR 16.403-1 Fixed-price incentive (firm target) contracts.
    (a) Description. A fixed-price incentive (firm target) contract specifies a target cost, a target profit, a price ceiling (but not a profit ceiling or floor), and a profit adjustment formula. These elements are all negotiated at the outset.…
  • FAR 16.403-2 Fixed-price incentive (successive targets) contracts.
    (a) Description. (1) A fixed-price incentive (successive targets) contract specifies the following elements, all of which are negotiated at the outset: (i) An initial target cost. (ii) An initial target profit. (iii) An initial profit ad…
  • FAR 16.405-1 Cost-plus-incentive-fee contracts.
    (a) Description. The cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs…
  • FAR 16.402-1 Cost incentives.
    (a) Most incentive contracts include only cost incentives, which take the form of a profit or fee adjustment formula and are intended to motivate the contractor to effectively manage costs. No incentive contract may provide for other incent…
  • DFARS 216.403-1 Fixed-price incentive (firm target) contracts.
    …(1) The contracting officer shall give particular consideration to the use of fixed-price incentive (firm target) contracts, especially for acquisitions moving from development to production. (2) The contracting officer shall pay particula…
  • FAR 16.402-2 Performance incentives.
    (a) Performance incentives may be considered in connection with specific product characteristics (e.g., a missile range, an aircraft speed, an engine thrust, or a vehicle maneuverability) or other specific elements of the contractor's perfo…
  • FAR 48.201 Clauses for supply or service contracts.
    … 37.1); (4) Providing for product or component improvement, unless the value engineering incentive application is restricted to areas not covered by provisions for product or component improvement; (5) For commercial products (see part 11…
  • FAR 16.401 General.
    (a) Incentive contracts as described in this subpart are appropriate when a firm-fixed-price contract is not appropriate and the required supplies or services can be acquired at lower costs and, in certain instances, with improved delivery …
  • FAR 48.104-2 Sharing acquisition savings.
    …m payment or as each future contract is awarded. (i) When the instant contract is not an incentive contract, the contractor's share of net acquisition savings is calculated and paid each time such savings are realized. This may occur once,…
  • FAR 52.216-10 Incentive Fee.
    …in 16.307(d), insert the following clause in solicitations and contracts when a cost-plus-incentive-fee contract (other than a facilities contract) is contemplated: Incentive Fee (JUN 2011) (a) General. The Government shall pay the Contra…
  • FAR 52.230-6 Administration of Cost Accounting Standards.
    …al costs of labor or material, described at 16.203-1(a)(2)), and 16.207; (2) Fixed-price incentive contracts and subcontracts where the price is not adjusted based on actual costs incurred (FAR Subpart 16.4); (3) Orders issued under indef…
  • FAR 52.244-2 Subcontracts.
    …ractor's price objective and the price negotiated; and (G) A complete explanation of the incentive fee or profit plan when incentives are used. The explanation shall identify each critical performance element, management decisions used to …
  • FAR 52.248-1 Value Engineering.
    …hare in any net acquisition savings realized from accepted VECP's, in accordance with the incentive sharing rates in paragraph (f) below. (b) Definitions. Acquisition savings, as used in this clause, means savings resulting from the applic…
  • DFARS 216.401-71 Objective criteria.
    …ossible to measure contract performance. Objective criteria are associated with cost-plus-incentive-fee and fixed-price-incentive contracts. (2) When objective criteria exist but the contracting officer determines that it is in the best in…
  • DFARS 216.403-2 Fixed-price incentive (successive targets) contracts.
    See PGI 216.403-2 for guidance on the use of fixed-price incentive (successive targets) contracts.
  • DFARS 216.405-1 Cost-plus-incentive-fee contracts.
    See PGI 216.405-1 for guidance on the use of cost-plus-incentive-fee contracts.
  • FAR 16.305 Cost-plus-award-fee contracts.
    …lence in contract performance. Cost-plus-award-fee contracts are covered in subpart 16.4, Incentive Contracts. See 16.401(e) for a more complete description and discussion of the application of these contracts. See 16.301-3 and 16.401(e)(5)…
  • FAR 31.103 Contracts with commercial organizations.
    …ts under terminated contracts (see 49.103 and 49.113); (4) Price revision of fixed-price incentive contracts (see 16.204 and 16.403); (5) Price redetermination of price redetermination contracts (see 16.205 and 16.206); and (6) Pricing c…
  • FAR 31.105 Construction and architect-engineer contracts.
    …ting, or determining costs under terminated contracts; (4) Price revision of fixed-price incentive contracts; and (5) Pricing changes and other contract modifications. (d) Except as otherwise provided in this paragraph (d), the allowabil…
  • FAR 52.203-10 Price or Fee Adjustment for Illegal or Improper Activity.
    … the amount of the fee specified in the contract at the time of award; (2) For cost-plus-incentive-fee conrtracts, the target fee specified in the contract at the time of award, notwithstanding any minimum fee or “fee floor” specified in t…
  • FAR 15.408 Solicitation provisions and contract clauses.
    …the contracting officer shall use the clause with— (1) Its Alternate I, if a fixed-price incentive contract is contemplated; or (2) Its Alternate II, if a cost-plus-incentive-fee contract is contemplated. (b) Price Reduction for Defectiv…
  • FAR 16.101 General.
    …y the contractor for the costs of performance and (2) the amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals. (b) The contract types are grouped into two broad catego…
  • FAR 16.306 Cost-plus-fixed-fee contracts.
    …se present too great a risk to contractors, but it provides the contractor only a minimum incentive to control costs. (b) Application. (1) A cost-plus-fixed-fee contract is suitable for use when the conditions of 16.301-2 are present and, …
  • FAR 16.406 Contract clauses.
    (a) Insert the clause at 52.216-16, Incentive Price Revision—Firm Target, in solicitations and contracts when a fixed-price incentive (firm target) contract is contemplated. If the contract calls for supplies or services to be ordered under…
  • FAR 19.708 Contract clauses.
    …n solicitations and contracts a clause substantially the same as the clause at 52.219-10, Incentive Subcontracting Program, when a subcontracting plan is required (see 19.702), and inclusion of a monetary incentive is, in the judgment of th…
  • FAR 31.205-6 Compensation for personal services.
    …wable reimbursed relocation costs are allowable under 31.205-35(a)(10).) (f) Bonuses and incentive compensation. (1) Bonuses and incentive compensation are allowable provided the— (i) Awards are paid or accrued under an agreement entered …
  • FAR 48.202 Clause for construction contracts.
    …he contract amount is estimated to exceed the simplified acquisition threshold, unless an incentive contract is contemplated. The contracting officer may include the clause in contracts of lesser value if the contracting officer sees a pote…
  • FAR 52.219-10 Incentive Subcontracting Program.
    As prescribed in 19.708(c)(1), insert the following clause: Incentive Subcontracting Program (OCT 2014) (a) Of the total dollars it plans to spend under subcontracts, the Contractor has committed itself in its subcontracting plan to try t…
  • FAR 52.226-1 Utilization of Indian Organizations and Indian-Owned Economic Enterprises.
    …0240-4000. The BIA will determine the eligibility and notify the Contracting Officer. No incentive payment will be made within 50 working days of subcontract award or while a challenge is pending. If a subcontractor is determined to be an …
  • DFARS 215.404-71-2 Performance risk.
    …) Standard. The standard designated range should apply to most contracts. (2) Technology incentive. For the technical factor only, contracting officers may use the technology incentive range for acquisitions that include development, produ…
  • DFARS 215.404-71-3 Contract type risk and working capital adjustment.
    … treat a fixed-price contract with redetermination provisions as if it were a fixed-price incentive contract with below normal conditions. (4) Cost-plus contracts shall not receive the working capital adjustment. (5) These types of contra…
  • DFARS 216.601 Time-and-materials contracts.
    …ee of certainty; (3) Address why a cost-plus-fixed-fee term or other cost-reimbursement, incentive, or fixed-price contract or order is not appropriate; for contracts (including indefinite-delivery contracts) and orders for other than comm…

FAR (chapter 1)

DFARS (chapter 2, Defense)

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Rule changes in progress: FAR, DFARS. Terms: glossary.