Sec. 21.06.03.01. General

A. Prohibition. Cost-plus-a-percentage-of-cost contracts and subcontracts are prohibited.

B. Policy Regarding Selection of Contract Types.

(1) Subject to the prohibition in §A, any type of contract which shall promote the best interests of the State may be used. However, preference shall be given in the order indicated to the following types of contracts:

(a) Fixed-price;

(b) Fixed-price incentive;

(c) Cost plus incentive fee; and

(d) Cost-plus fixed fee or cost-reimbursement.

(2) The objective when selecting a contract type is to obtain the best value in the time required and at the lowest cost or price or greatest revenue to the State. In order to achieve this objective, the procurement officer, before choosing a contract type, should review those elements of the procurement which directly affect the cost, time, risk, and profit incentives bearing on the performance.

(3) Among the factors to be considered in selecting any type of contract are:

(a) The type and complexity of the procurement;

(b) The difficulty of estimating performance costs such as the inability of the State to develop definitive specifications, to identify the risks to the contractor inherent in the nature of the work to be performed, or otherwise to establish clearly the requirements of the contract;

(c) The administrative costs to both parties;

(d) The degree to which the State shall provide technical coordination during the performance of the contract;

(e) The effect of the choice of the type of contract on the amount of competition to be expected;

(f) The stability of material or commodity market prices or wage levels;

(g) The urgency of the requirement; and

(h) The length of contract performance.

(4) Except for a firm fixed-price contract, no contract type may be used unless the procurement officer determines that the contractor's accounting system will permit timely development of all necessary cost data in the form required by the specific type of contract contemplated and that the contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles and that determination is approved by the appropriate Department.