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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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49 sections with “incentive type contracts”: the first 40

  • 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 16.402-2 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 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…
  • FAR 36.208 Concurrent performance of firm-fixed-price and other types of construction contracts.
    In view of potential labor and administrative problems, cost-plus-fixed-fee, price-incentive, or other types of contracts with cost variation or cost adjustment features shall not be permitted concurrently, at the same work site, with firm-…
  • 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 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 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 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 16.306 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 16.401 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 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 48.104-2 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 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 52.226-1 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 52.248-1 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 215.404-71-2 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 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 216.601 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 16.103 Negotiating contract type.
    …at will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance. (b) A firm-fixed-price contract, which best utilizes the basic profit motive of business enterpri…
  • FAR 16.104 Factors in selecting contract types.
    … factor, the Government may choose to assume a greater proportion of risk or it may offer incentives tailored to performance outcomes to ensure timely contract performance. (g) Period of performance or length of production run. In times of…
  • 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 16.601 Time-and-materials contracts.
    …. (1) Government surveillance. A time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, appropriate Government surveillance of contractor performance is required…
  • FAR 30.606 Resolving cost impacts.
    …ecovery of monies by the Government (e.g., due to cost overruns); or (ii) Distortions of incentive provisions and relationships between target costs, ceiling costs, and actual costs for incentive type contracts. (3) When using an alternat…
  • FAR 32.601 General.
    …ulting from contract terms for price redetermination or for determination of prices under incentive type contracts. (2) Price or cost reductions for defective certified cost or pricing data. (3) Financing payments determined to be in exce…
  • 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 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 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…
  • DFARS 209.104-1 General standards.
    (e) For cost-reimbursement or incentive type contracts, or contracts which provide for progress payments based on costs or on a percentage or stage of completion, the prospective contractor's accounting system and related internal controls …
  • 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 252.242-7005 Contractor business systems.
    …under this contract: (i) Interim payments under— (A) Cost-reimbursement contracts; (B) Incentive type contracts; (C) Time-and-materials contracts; (D) Labor-hour contracts. (ii) Progress payments. (iii) Performance-based payments. (…
  • DFARS 253.209-1 Responsible prospective contractors.
    …ll request an accounting system review when soliciting and awarding cost-reimbursement or incentive type contracts, or contracts which provide for progress payments based on costs or on a percentage or stage of completion. (ii) The factors…
  • FAR 15.407-2 Make-or-buy programs.
    …rwise in the best interest of the Government. If this situation occurs in any fixed-price incentive or cost-plus-incentive-fee contract, the contracting officer shall specify these items in the contract and state that they are subject to pa…
  • FAR 19.705-4 Reviewing the subcontracting plan.
    …se the Government's cost or seriously impede the attainment of acquisition objectives. An incentive subcontracting clause (see 52.219-10, Incentive Subcontracting Program), may be used when additional and unique contract effort, such as pro…
  • FAR 52.215-2 Audit and Records—Negotiation.
    …r data, or in any other form. (b) Examination of costs. If this is a cost-reimbursement, incentive, time-and-materials, labor-hour, or price redeterminable contract, or any combination of these, the Contractor shall maintain and the Contra…
  • FAR 52.248-3 Value Engineering—Construction.
    …P accepted by the Government under this contract, but shall exclude any value engineering incentive payments to a subcontractor. The Contractor may choose any arrangement for subcontractor value engineering incentive payments; provided, tha…
  • DFARS 212.7002 Policy.
    … 12.207, contracting officers shall use fixed-price type contracts, including fixed-price incentive contracts, for awards resulting from a CSO. When using a fixed-price incentive contract, see FAR 12.214 and subpart 16.4 for additional requ…
  • FAR 15.305 Proposal evaluation.
    …'s ability to perform the contract. Cost realism analyses may also be used on fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price-type contracts (see 15.404-1(d)(3)). (See 37.115 for uncompensated over…
  • FAR 15.404-1 Proposal analysis techniques.
    … realism analysis. (3) Cost realism analyses may also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price-type contracts when new requirements may not be fully understood by com…

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.