Federal contracts fall into two broad families: fixed-price contracts, where you agree a set price and carry the risk of delivering within it, and cost-reimbursement contracts, where the government pays your allowable costs plus a fee. On top of these sit vehicles like IDIQ, GWACs and BPAs that govern how and how often orders are placed. Understanding which type you are bidding tells you where the risk sits and how to price.
This guide explains the main government contract types in plain English and what each means for you as a bidder.
Why do government contract types matter?
The contract type determines who carries the risk if the work costs more than expected — you or the government. That single fact shapes how you price, how much detail you need before bidding, and how much financial exposure you take on. Reading the solicitation to identify the contract type is one of the first things you should do when you respond to an RFP, because it changes your whole approach.
Fixed-price contracts
Firm-Fixed-Price (FFP)
You agree one price for the defined work, full stop. If it costs you more to deliver, you absorb the loss; if you deliver efficiently, you keep the difference. FFP puts maximum risk on the contractor and is best suited to well-defined requirements where you can estimate cost confidently. It is the most common type for commercial-style goods and services.
Fixed-Price with Economic Price Adjustment
A fixed-price contract that allows specific, defined price adjustments — for example, for major swings in labour or material costs. It shares some cost risk on volatile inputs while keeping the fixed-price structure.
Cost-reimbursement contracts
Here the government reimburses your allowable, allocable costs and pays a fee on top. These suit work where the scope cannot be defined precisely up front — research, development, or complex services. The government carries more of the cost risk, but these contracts require robust accounting systems and closer oversight. Common variants include:
- Cost-Plus-Fixed-Fee (CPFF): costs reimbursed plus a fixed fee that does not change with actual costs.
- Cost-Plus-Incentive-Fee (CPIF): fee varies based on performance against targets.
- Cost-Plus-Award-Fee (CPAF): fee is partly discretionary, awarded based on the government’s evaluation of your performance.
Time-and-Materials (T&M) and Labour-Hour
Time-and-Materials contracts pay fixed hourly labour rates plus the cost of materials. Labour-Hour is the same without the materials element. They suit work where you cannot estimate the extent of the effort up front — but because the contractor has little incentive to control hours, the government caps the value and monitors them closely. Expect a ceiling price you cannot exceed without approval.
Contract vehicles: IDIQ, GWAC and BPA
Some “types” are really ordering vehicles — frameworks that set the terms, then allow the government to place individual orders over time.
Indefinite-Delivery/Indefinite-Quantity (IDIQ)
An IDIQ sets terms for an indefinite quantity of supplies or services over a fixed period. You win a place on the IDIQ, then compete for or receive individual task orders (services) or delivery orders (supplies) during its life. Winning the IDIQ is the entry ticket; the task orders are where the actual work and revenue are.
Government-Wide Acquisition Contract (GWAC)
A GWAC is a pre-competed, government-wide IDIQ for IT solutions that multiple agencies can order from. Holding a GWAC position gives you access to a large pool of agencies without each running a full procurement.
Blanket Purchase Agreement (BPA)
A BPA is a simplified arrangement for recurring needs — a pre-set “charge account” that lets an agency place repeat orders against agreed terms and pricing without starting from scratch each time. BPAs are often established against GSA Schedule contracts.
Which contract type is best for your business?
There is no single “best” type — only the type that fits the work and your risk appetite. Fixed-price rewards efficient, confident delivery of well-defined work but punishes underestimation. Cost-reimbursement suits uncertain scope but demands strong accounting and oversight. Vehicles like IDIQs and GWACs are long-term positioning plays: winning a seat matters, but your return depends on competing well for the task orders that follow. Read the contract type before you price, and make sure your bid — and your business — can carry the risk it implies. For help positioning across these, our proposal specialists work across all federal contract types.
Government contract types: frequently asked questions
What is the most common type of government contract?
Firm-Fixed-Price (FFP) is the most common, especially for well-defined goods and services. The government prefers it because the contractor carries the cost risk and the price is certain.
What is the difference between an IDIQ and a GWAC?
An IDIQ is an indefinite-quantity vehicle that can be agency-specific or government-wide. A GWAC is a specific kind of government-wide IDIQ for IT solutions that many agencies can order from.
Which contract type carries the most risk for contractors?
Firm-Fixed-Price puts the most cost risk on the contractor, because you must deliver within the agreed price no matter what it actually costs you. Cost-reimbursement shifts more of that risk to the government.
What is a BPA in government contracting?
A Blanket Purchase Agreement is a simplified method for filling recurring needs, letting an agency place repeat orders against pre-agreed terms and pricing. BPAs are frequently established against GSA Schedule contracts.
Written by Joshua Smith, a seasoned bid-writing expert with experience across the UK, Middle East and US, helping organisations secure the contracts they deserve through high-quality, competitive tender responses.