Quantcast Chapter 5 Quality Assurance Operations in Contractor Selection

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5-110 General. The formation of Government contracts is governed by laws
including the Armed Services Procurement Act of 1947, the Federal Property
and Administrative Act of 1949, and the Competition in Contracting Act of
1984.  Government contracts a real so governed by the Federal Acquisition
Regulation (FAR) and supplemental regulations. In addition, the Naval
Facilities Engineers Command Contracting Manual (P-68) establishes uniform
policies and procedures for the command.
A wide selection of contract types is available to the Government in order
to provide needed flexibility in acquiring the large variety of supplies an
services.  The NAVFACENGCOM Contracting Officer is responsible for selecting
one of the two basic contract types:  the fixed price or the cost
reimbursement contract.
Fixed price and cost reimbursement contracts are distinguished by the degree
of risk allocated to the contractor.  In the fixed price contract, the
contractor is paid a predetermined price for satisfactorily completing the
work.  If his costs are greater than his bid, he will suffer a loss. If his
costs are lower than his bid, he will realize a profit. Under a cost
reimbursement contract, a contractor is paid for all allowable costs plus a
fee.  If the cost of performance is greater than estimated, the Government
is required to reimburse the contractor for the additional costs for
completion of the work.
Since the use of some fixed price and cost reimbursement contracts
requires approval at NAVFACENGCOM Headquarters, early coordination with the
activity contract specialist is necessary to ensure timely receipt of
5-120 Fixed Price Contracts. The following types of fixed price
contracts are used by NAVFACENGCOM.
(a) Firm Fixed Price.  In a firm fixed price contract, the price is a
lump sum amount and not subject to adjustment based on the costs incurred by
the contractor in carrying out the work.
(b) Indefinite Delivery Contracts. Indefinite delivery contracts are
of three types:  definite quantity, indefinite quantity, and requirements.
(1)  A definite quantity contract provides for delivery of a
definite quantity of specified services for a fixed period with deliveries
provided when ordered by the Government.


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