29 Types of Government Contracts in the United States

Whether you are pursuing your first federal contract or expanding into state and local markets, understanding the different types of government contracts is foundational to building a winning strategy. The wrong contract type can erode your margins, create compliance headaches, or put you at a competitive disadvantage before the work even starts.

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This guide covers all 29 types of government contracts, from the most common to the most specialized, with plain-language explanations and links to in-depth resources for each.

Quick Reference: All 29 Types at a Glance

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Section 1: The 2 Basic Types of Government Contracts

Before diving into specific contract structures, it helps to understand the two broad markets that government contracts fall into. They operate under different rules, different oversight bodies, and attract different types of vendors.

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1. Federal Government Contracts

Federal contracts are agreements between a private vendor and a U.S. federal executive agency, the Department of Defense, Department of Health and Human Services, NASA, GSA, and hundreds of others. They are governed by the Federal Acquisition Regulation (FAR), a comprehensive, uniform rulebook that applies to all federal agencies.

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Key characteristics of federal contracts:

• Governed by the FAR and agency-specific supplements (DFARS, HHSAR, etc.)
• Administered by warranted Contracting Officers (COs)
• Subject to DCAA audits on cost-type contracts
• May require Cost Accounting Standards (CAS) compliance for large contractors
• Opportunities posted on SAM.gov
• In FY2024, the federal government awarded approximately $755 billion in contracts (Source: GAO.gov)

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Federal contracts range from simple purchase orders for off-the-shelf supplies to multi-billion-dollar defense programs spanning decades. They encompass every contract type covered in this guide, from Firm-Fixed-Price to OTAs.

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2. SLED Contracts (State, Local, and Education)

SLED contracts are agreements between vendors and state governments, local governments (counties, cities, municipalities), school districts, and public universities and colleges. Unlike the federal market, which follows one uniform rulebook, the SLED market is governed by individual state and local procurement codes that vary significantly across jurisdictions.

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Key characteristics of SLED contracts:

• Each state has its own procurement laws and regulations, no single rulebook equivalent to the FAR
• Administered by state procurement offices, county purchasing departments, or school district business offices
• Generally do not require DCAA-compliant accounting systems
• Dollar thresholds for competitive bidding vary by state and jurisdiction
• Opportunities posted on state procurement portals, BidNet, DemandStar, and agency websites
• Cooperative purchasing vehicles like NASPO ValuePoint, Sourcewell, and OMNIA Partners simplify access to thousands of SLED buyers at once

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The SLED market is often larger and more accessible than many vendors realize. Combined state and local government spending represents trillions of dollars annually, and the procurement process is often less complex than federal contracting for smaller purchases.

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Federal vs. SLED: Key Differences at a Glance

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Section 2: Fixed-Price Contracts

Fixed-price contracts place the cost risk squarely on the contractor. The price is agreed upon before work begins and does not change, regardless of what it actually costs to perform. The contractor keeps any savings; the contractor absorbs any overruns.

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Fixed-price contracts are the most common contract type in both federal and SLED markets. They work best when the scope of work is clearly defined, requirements are stable, and there is enough cost data to establish a fair and reasonable price upfront.

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3. Firm-Fixed-Price (FFP)

The simplest and most widely used contract type in government. One price, one scope, no adjustments. The contractor bears 100% of cost risk, and earns 100% of any savings. Governed by FAR 16.202. Read the full guide to FFP contracts →

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4. Fixed-Price Incentive, Firm Target (FPIF)

A fixed-price contract where the final price adjusts based on actual cost performance against a target, using a share ratio, ceiling price, and Point of Total Assumption (PTA). Widely used in DoD shipbuilding and defense production programs. Governed by FAR 16.403-1. Read the full guide to FPI contracts →

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5. Fixed-Price with Economic Price Adjustment (FPEPA)

An FFP variant that allows limited, pre-defined price adjustments tied to specific economic indexes, such as labor rate changes or material cost fluctuations. Used on longer-term contracts where inflation risk is significant. Governed by FAR 16.203. (Full glossary page coming soon)

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6. Fixed-Price with Award Fee (FPAF)

An FFP contract with an additional award fee pool the contractor can earn based on the government's subjective evaluation of performance quality. The base price is fully fixed, the award fee is the only variable. Governed by FAR 16.404. (Full glossary page coming soon)

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7. Fixed-Price Level-of-Effort (FFP/LOE)

A fixed-price contract where the contractor commits to providing a specified level of effort over a set time period, rather than delivering a specific end product. Used for research and investigation work where outcomes cannot be precisely defined. Governed by FAR 16.207. (Full glossary page coming soon)

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8. Fixed-Ceiling-Price with Retroactive Redetermination

A rarely used variant for small R&D contracts at or below the Simplified Acquisition Threshold. A ceiling price is set upfront; the final price is retroactively determined after performance based on actual costs, within the ceiling. Governed by FAR 16.206. (Full glossary page coming soon)

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Section 3: Cost-Reimbursement Contracts

Cost-reimbursement contracts shift cost risk to the government. The contractor is paid back for all allowable costs incurred, plus a fee. They are used when the scope of work is uncertain, technical risk is high, or outcomes cannot be accurately priced in advance, such as in research, development, and complex engineering programs.

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9. Cost-Plus-Fixed-Fee (CPFF)

The most common cost-type contract. The government reimburses all allowable costs and pays a fixed fee negotiated upfront, which does not change regardless of actual costs. Fee is capped at 15% of estimated cost for R&D and 10% for other work. Governed by FAR 16.306. Read the full guide to CPFF contracts →

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10. Cost-Plus-Incentive-Fee (CPIF)

Costs are reimbursed and the fee varies based on actual cost performance against a target, using a share ratio with minimum and maximum fee limits. Rewards cost efficiency; penalizes overruns. More motivating than CPFF but more complex to administer. Governed by FAR 16.405-1. Read the full guide to CPIF contracts →

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11. Cost-Plus-Award-Fee (CPAF)

Costs are reimbursed and the fee is determined by the government's subjective evaluation of overall contractor performance, covering quality, schedule, cost control, and management. The Fee Determining Official (FDO) makes the final, unilateral decision. Heavily used by NASA and DoD. Governed by FAR 16.401(e). Read the full guide to CPAF contracts →

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12. Cost-Plus-a-Percentage-of-Cost (CPPC) ❌

The fee is calculated as a fixed percentage of actual costs, meaning the more the contractor spends, the higher the fee. This creates a direct incentive to overspend and is explicitly prohibited in federal contracting under FAR 16.102(c). Also prohibited for federally funded SLED programs under 2 CFR Part 200. Read the full guide to CPPC contracts →

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13. Cost Contract

A pure cost-reimbursement contract with no fee, the contractor is reimbursed for allowable costs only, with zero profit. Used primarily for research and development work with nonprofit educational institutions and other nonprofit organizations. Governed by FAR 16.302.

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14. Cost-Sharing Contract

A cost-reimbursement contract where the contractor receives no fee and is reimbursed for only an agreed-upon portion of costs, typically when the contractor expects substantial non-government benefit from the work. Governed by FAR 16.303.

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Section 4: Time-Based Contracts

Time-based contracts pay for labor hours at pre-agreed rates, plus actual material costs. They are used when the scope or duration of work cannot be defined upfront, making a fixed price impractical. Because the government pays by the hour rather than for a finished product, time-based contracts require active oversight to ensure efficient use of resources.

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15. Time and Materials (T&M)

The contractor bills pre-agreed hourly rates by labor category plus actual material costs. Must include a Not-to-Exceed (NTE) ceiling. Widely used for IT services, professional services, and emergency response in both federal and SLED markets. Governed by FAR 16.601. Read the full guide to T&M contracts →

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16. Labor Hour (LH)

A variant of T&M where only labor is billed, no materials. The structure is identical to T&M except that materials are excluded from scope. Used for pure services work like consulting, staffing, and analysis support. Governed by FAR 16.602.

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Section 5: Indefinite Delivery Contracts

Indefinite delivery contracts establish a master agreement with pre-negotiated terms and prices, but no guaranteed quantity of work. Individual orders are placed as needs arise throughout the contract period. These structures are the backbone of the federal IT and services market.

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17. IDIQ (Indefinite Delivery / Indefinite Quantity)

A master contract with a guaranteed minimum purchase and a maximum ceiling value. The government places individual task orders or delivery orders as needs arise. Can be single-award or multiple-award. Used for everything from IT services to construction. Governed by FAR 16.504. Read the full guide to IDIQ contracts →

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18. Definite Quantity Contract

A delivery-order contract that specifies a firm quantity of supplies or services to be delivered at designated locations within a set period. Unlike IDIQ, the quantity is fixed, not indefinite. Used when requirements are predictable but delivery timing may vary. Governed by FAR 16.502.

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19. Requirements Contract

A delivery-order contract in which the government agrees to purchase all of its actual requirements for a specific supply or service from a single contractor during the contract period. Quantity is not specified upfront, but the government commits that whatever it needs, it will buy from this vendor. Governed by FAR 16.503.

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Section 6: Government-Wide Contract Vehicles

These are pre-competed contract vehicles that any eligible federal agency can access, eliminating the need for each agency to run its own full competitive procurement. They are some of the most valuable strategic assets in the federal market for vendors.

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20. Governmentwide Acquisition Contracts (GWACs)

Pre-competed, multiple-award IDIQ contracts specifically for IT solutions, available to all federal agencies. Recognized by OMB as Best-in-Class vehicles. Major GWACs include Alliant 3, Polaris, 8(a) STARS III, VETS 2, and NASA SEWP. Governed by FAR 16.505. Read the full guide to GWACs →

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21. Blanket Purchase Agreement (BPA)

A pre-negotiated "charge account" with one or more vendors for repetitive purchases. No funds are obligated at setup, money is committed only when individual call orders are placed. Widely used across federal and SLED markets. Governed by FAR 13.303. Read the full guide to BPAs →

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22. Basic Ordering Agreement (BOA)

A written arrangement, not a contract, that establishes terms, conditions, and pricing for future orders of supplies or services when quantities and delivery dates cannot be determined in advance. More complex than a BPA and used for higher-value procurement. Governed by FAR 16.703.

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23. GSA Multiple Award Schedule (MAS)

Long-term, governmentwide IDIQ contracts through GSA that provide commercial products and services at pre-negotiated prices to federal agencies, and to state and local governments through the Cooperative Purchasing Program. Also called GSA Schedules or Federal Supply Schedules. Over $51 billion in purchases annually.

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Section 7: Special Agreement Types

These instruments sit outside or alongside traditional FAR contract structures, used for specific strategic purposes in federal and sometimes SLED procurement.

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24. Other Transaction Authority (OTA)

A non-FAR agreement used primarily by DoD to acquire research, prototypes, and production from innovative companies, including non-traditional defense contractors and startups. Faster, more flexible, and less regulatory burden than standard contracts. DoD OTA obligations grew over 700% between FY2015 and FY2021. Read the full guide to OTA contracts →

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25. Executory Contract

Any active contract where both parties still have obligations to fulfill, meaning neither the work nor the payments are complete. Most active government contracts are executory. The term has particular legal significance in bankruptcy proceedings and contract modifications. Read the full guide to executory contracts →

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26. Contractor Teaming Arrangement

A formal pre-award agreement between two or more companies to jointly pursue a government contract, typically with one serving as prime and the other(s) as subcontractors. Does not create a new legal entity. Governed by FAR Subpart 9.6. Read the full guide to contractor teaming arrangements →
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Section 8: SLED-Specific Contract Structures

State, local, and education agencies use procurement structures that mirror federal contract vehicles, but under different names and governed by state and local law. These are the most important vehicles for vendors targeting the SLED market.

27. OGS Contracts (New York State)

Statewide term contracts and backdrop contracts administered by New York's Office of General Services, available to state agencies, local governments, school districts, and nonprofits across New York. State agencies are required by law to check OGS contracts before conducting their own procurement. Read the full guide to NY OGS contracts →

28. State Term Contracts

Statewide pre-negotiated contracts established by each state's central procurement agency, the equivalent of a federal IDIQ or GSA Schedule at the state level. Any eligible state agency or authorized local buyer can purchase from a state term contract without running its own competitive bid. Available in all 50 states under various names (state price agreements, master contracts, statewide purchasing agreements).
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29. Cooperative Purchasing Contracts

Pre-competed contracts that any eligible SLED agency can use, regardless of which agency originally solicited them. The SLED market's equivalent of GWACs. Major cooperative vehicles include NASPO ValuePoint (state governments), Sourcewell (local governments and education), OMNIA Partners (broad public sector), and E&I Cooperative Services (higher education and K–12). Winning a cooperative contract gives vendors access to thousands of SLED buyers nationwide from a single award.

Frequently Asked Questions

What are the 4 types of government contracts?
The Federal Acquisition Regulation organizes federal contracts into four primary families: (1) Fixed-Price Contracts, where the price is set upfront and the contractor bears cost risk; (2) Cost-Reimbursement Contracts, where the government pays actual costs plus a fee; (3) Time and Materials / Labor Hour Contracts, where payment is based on hours worked and materials used; and (4) Indefinite Delivery Contracts, where orders are placed as needed against a master agreement. Every federal contract type covered in this guide falls within one of these four families.
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What is the most common type of government contract?
Firm-Fixed-Price (FFP) is by far the most common contract type in federal procurement by number of contract actions. It is also the dominant structure in the SLED market. Its simplicity, budget certainty, and minimal administrative burden make it the default choice whenever scope and requirements are well-defined.
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What is the difference between a fixed-price and cost-reimbursement contract?
In a fixed-price contract, the price is locked in before work begins, the contractor keeps any savings and absorbs any overruns. In a cost-reimbursement contract, the government pays the contractor's actual allowable costs plus a fee, shifting cost risk to the government. Fixed-price contracts are preferred when scope is clear; cost-reimbursement contracts are used when scope is uncertain or technical risk is high.
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What type of government contract is best for small businesses?
It depends on your capabilities and risk tolerance. FFP contracts are accessible and widely available but require accurate cost estimating. T&M contracts are common in IT services and consulting with lower financial risk. IDIQ vehicles, particularly small business set-asides like 8(a) STARS III and Polaris, offer the best long-term revenue potential once awarded. For SLED, cooperative purchasing contracts like Sourcewell and NASPO ValuePoint are often the most accessible entry point.
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What is the difference between federal and SLED contracts?
Federal contracts are governed by the FAR and apply uniformly across all federal executive agencies. SLED contracts are governed by individual state and local procurement laws, which vary significantly by jurisdiction. Federal contracts may require DCAA-compliant accounting for cost-type work; SLED contracts generally do not. Both markets use similar contract structures, but the vehicles, rules, and oversight mechanisms are distinct.

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Which contract type carries the most risk for vendors?
Firm-Fixed-Price carries the most financial risk for vendors, every dollar over budget is the contractor's problem. Among cost-type contracts, CPAF carries the most uncertainty around fee because the government's subjective evaluation determines your profit. The prohibited CPPC structure would carry zero risk for vendors, which is exactly why it was banned.

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What contract type does the government prefer?
The federal government strongly prefers fixed-price contracts, particularly FFP, because they provide budget certainty and transfer cost risk to contractors. FAR guidance instructs contracting officers to use the contract type that places appropriate risk on the contractor while still being fair and reasonable. Cost-reimbursement contracts are used only when fixed-price is not feasible due to uncertainty. In the SLED market, fixed-price is similarly the default for most purchases.
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How to Choose the Right Contract Type

Not sure which contract type applies to your situation? Use this simple decision framework:

• Is the scope of work clearly defined? → Fixed-Price (start with FFP)
• Is there cost uncertainty but delivery is required? → Fixed-Price Incentive (FPIF)
• Is the scope uncertain and costs hard to predict? → Cost-Reimbursement (CPFF, CPIF, or CPAF)
• Can't define scope or duration upfront? → Time and Materials (T&M)
• Recurring needs with uncertain quantities? → IDIQ or BPA
• Innovative technology; want to avoid FAR burden? → OTA
• Targeting SLED market? → Cooperative purchasing (NASPO ValuePoint, Sourcewell) or state term contracts
• Need to combine capabilities to compete? → Contractor Teaming Arrangement

The right contract type is the one that fairly allocates risk between you and the government, and that matches the nature of the work you are performing.

Explore our complete government contracting glossary at pursuit.us/glossary for in-depth guides on each contract type, including real examples, pros and cons, and SLED market applications.

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