UNAUTHORIZED CONTRACT TYPES AND VARIATIONS

The FAR very specifically states that contract types other than those authorized by the regulations are not permitted. However, approved and unapproved variations occasionally exist. For example, a major weapon system contract was converted to a “cost-plus-fixed-loss” contract as part of an agreement to ensure delivery when the contractor had a significant financial problem. This contractual arrangement had to be approved at the highest level of the agency.

Other unauthorized variations typically attempt to provide downward-only adjustments to fixed-price contracts. For example, some contracting officers seek a downward-only adjustment clause in T&M contracts. In other words, the price will be the lower of the negotiated fixed hourly rate and the actual hourly rate determined on an after-the-fact basis. This is an inequitable contract type and is not authorized. Any “maverick” provision that violates the sanctity of a fixed-price contract should be rejected.