4.  Clarify Contract Types

Comment: Two respondents expressed concern that the proposed language at FAR 16.600, which states that T&M and LH contracts are not fixed-price contracts, may create confusion or be taken out of context because it does not state that T&M and LH contracts are not cost-reimbursement contracts. The respondents believe that this could blur the lines between T&M and LH contracts and cost-reimbursement contracts, creating confusion on how to administer T&M and LH contracts and orders. The respondents recommended revising the FAR to clarify the nature of the T&M and LH contracts as a hybrid contract type that is neither fixed-price nor cost-reimbursement but does include elements of each; or to describe the attributes and cross-reference to the applicable FAR subparts.

Response: T&M and LH contracts are neither fixed-price contracts nor cost-reimbursement contract types. T&M and LH contracts comprise unique contract types and are described in a separate FAR subpart, 16.6.

This rule addresses the use of T&M and LH contracts for the acquisition of commercial services. The revisions made in this rule are intended to clarify the requirement to use fixed-price contract types for the acquisition of commercial items, unless specific requirements and conditions are documented to support the decision to use the T&M and LH contracts to acquire commercial services, a subset of commercial items.