Contract Formation and Types Flashcards

Which element is NOT required for a valid contract to be formed?

Answer: Notarization

A valid contract requires offer, acceptance, consideration, and mutual assent — notarization is not a required element for most contracts.

A firm-fixed-price (FFP) contract places the cost risk primarily on which party?

Answer: The contractor

Under a firm-fixed-price contract, the contractor bears full cost risk because the price is not subject to adjustment based on actual costs.

What type of contract reimburses the contractor for all allowable costs plus a fixed fee?

Answer: Cost-Plus-Fixed-Fee (CPFF)

A Cost-Plus-Fixed-Fee contract reimburses all allowable, allocable costs and adds a pre-negotiated fixed fee regardless of actual cost outcomes.

Which contract type is considered the highest risk for the government?

Answer: Cost-Plus-Percentage-of-Cost

Cost-Plus-Percentage-of-Cost contracts are generally prohibited in US federal contracting because they incentivize the contractor to increase costs.

An Indefinite Delivery/Indefinite Quantity (IDIQ) contract must specify a:

Answer: Minimum and maximum quantity

FAR requires IDIQ contracts to establish both a minimum and maximum quantity to obligate the government to purchase at least the minimum.

Which of the following best describes a Time and Materials (T&M) contract?

Answer: Payment for labor hours at fixed rates plus actual material costs

T&M contracts pay for direct labor at negotiated fixed hourly rates and reimburse actual material costs, making them appropriate when scope is uncertain.