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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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57 sections with “incentive fee”: the first 40

  • 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 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 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 16.304 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 16.402-1 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…
  • 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…
  • DFARS 216.402-2 Performance incentives.
    (1) See PGI 216.402-2 for guidance on establishing performance incentives. (2) Contracting officers shall ensure requirements about the payment of incentive fees or the imposition of penalties are included in the solicitation for a contrac…
  • 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 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 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 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…
  • 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 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 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 16.202-1 Description.
    …k and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. The co…
  • 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 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 42.1503 Procedures.
    …itions in the tables 42-1 or 42-2 of this section. (c)(1) When the contract provides for incentive fees, the incentive-fee contract performance evaluation shall be entered into CPARS. (2) When the contract provides for award fee, the awar…
  • 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 52.215-9 Changes or Additions to Make-or-Buy Program.
    …icer an equitable reduction in the contract price in accordance with paragraph (k) of the Incentive Price Revision—Firm Target clause or paragraph (m) of the Incentive Price Revision—Successive Targets clause of this contract. Alternate II…
  • 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 …
  • 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 52.248-1 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 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 216.401 General.
    (c) See PGI 216.401(c) for information on the Defense Acquisition University Award and Incentive Fees Community of Practice. (d) The determination and findings justifying that the use of an incentive- or award-fee contract is in the best i…
  • 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…
  • FAR 16.203-1 Description.
    …se a fixed-price contract with economic price adjustment in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors o…
  • 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 16.307 Contract clauses.
    …tract is contemplated. (d) The contracting officer shall insert the clause at 52.216-10, Incentive Fee, in solicitations and contracts when a cost-plus-incentive-fee contract is contemplated. (e)(1) The contracting officer shall insert th…
  • FAR 16.404 Fixed-price contracts with award fees.
    …ed in fixed-price contracts when the Government wishes to motivate a contractor and other incentives cannot be used because contractor performance cannot be measured objectively. Such contracts shall establish a fixed price (including norma…
  • FAR 19.705-1 General.
    …of increased subcontracting opportunities in negotiated acquisition by providing monetary incentives such as payments based on actual subcontracting achievement or award-fee contracting (see the clause at 52.219-10, Incentive Subcontracting…
  • DFARS 216.405-2 Cost-plus-award-fee contracts.
    … cost-plus-fixed-fee contracts apply; or (2) Developing objective targets so a cost-plus-incentive-fee contract can be used; or (B) For either engineering development or operational system development acquisitions that have specifications…
  • DFARS 252.246-7001 Warranty of data.
    … (C) Seventy-five percent of the total subcontract target profit or fee in a fixed-price-incentive or cost-plus-incentive subcontract. (iii) Damages due the Government under the provisions of this warranty are not an allowable cost. (iv)…
  • 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 30.604 Processing changes to disclosed or established cost accounting practices.
    …by Executive agency, including any impact the change may have on contract and subcontract incentives, fees, and profits, for each of the following groups: (A) Fixed-price contracts and subcontracts. (B) Flexibly-priced contracts and subco…
  • FAR 30.605 Processing noncompliances.
    …utive agency, including any impact the noncompliance may have on contract and subcontract incentives, fees, and profits, for each of the following groups: (A) Fixed-price contracts and subcontracts. (B) Flexibly-priced contracts and subco…
  • FAR 35.006 Contracting methods and contract type.
    …eimbursement completion arrangement (see 16.306(d)). When the use of cost and performance incentives is desirable and practicable, fixed-price incentive and cost-plus-incentive-fee contracts should be considered in that order of preference.…
  • FAR 42.1500 Scope of subpart.
    … subpart does not apply to procedures used by agencies in determining fees under award or incentive fee contracts. See subpart 16.4. However, the fee amount paid to contractors should be reflective of the contractor's performance and the pa…
  • DFARS 207.106 Additional requirements for major systems.
    … embedded software. At a minimum the contracting officer shall— (i) Encourage the use of incentive fees and penalties as appropriate; and (ii) Allow the program manager or comparable requiring activity official exercising program manageme…
  • FAR 12.207 Contract type.
    … by this subpart may be used in conjunction with an award fee and performance or delivery incentives when the award fee or incentive is based solely on factors other than cost (see 16.202-1 and 16.203-1). (e) Use of any contract type other…

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.