Types of Government Contracts

Government Contracts

Government contracts are a great way to get sustainable income for businesses of all sizes. You know you’re getting paid, so you don’t normally worry about unpaid invoices every month. But when the number of small businesses getting contracts is dropping, you’ll need to research to ensure you find the right kind of contract.

Do you want to learn more about the types of government contracts available to you? Keep reading to learn what to expect when getting into government contracting.

Fixed-Price Contract

A fixed-price contract is one where the price is set in stone and does not change over the course of the contract. This type of contract is great for the government. They know the price they’re getting, so it makes it less risky to take on the contract.

However, it is riskier for the company providing goods and services. Prices may change over the course of the contract, so it can sometimes cause issues in the future for the vendor. 

Cost Reimbursement Contract

A cost reimbursement contract is one for companies that want to be paid for their costs. Instead of offering a fixed price that doesn’t change, you send an invoice that includes the price for your work and the cost of materials it takes to perform the job.

This is a great choice for companies that are worried about fluctuations in material costs and other factors. It makes it less risky for you but adds more risk for government agencies.

Incentive Contract

There will be times when performance matters for government contracts. An incentive contract may be considered one of the non-traditional government contracting methods because it offers variable pricing for work done.

You come up with performance levels and get paid based on how well you perform. It’s helpful for government agencies that are aiming to achieve certain goals and are worried about the ability of contractors to meet those goals.

Joint Venture

A joint venture is useful for smaller businesses wanting to get government contracts. They work together with larger companies to provide a service to the government.

There are also many organizations out there that partner with small businesses to help them drive results for government agencies. Click here to learn about one of those organizations.

Indefinite-Delivery Contract

An indefinite-delivery contract has no set guidelines for the number of materials purchased or a timeline for purchasing. It’s for government agencies with no clear guidelines for what they need, so they hire a company to provide services on-demand.

Agencies will usually develop guidelines for the typical number of materials needed when they order. They then run a trial period to see if a company can meet those requirements before signing longer contracts.

Now You Know the Types of Government Contracts

You have a lot of things to consider when you try to win a government contract for your business. You have a ton of competition and need to ensure everything you do is correct, so it pays to learn everything possible about your options before you start.

One big part of that is understanding what types of government contracts are out there. Now that you understand what your options are, you can tailor your offering to your chosen type of contract to maximize your chances of winning bids.

Check out the blog for other business tips that will help you take your company to success.