TL;DR. The FAR is the government's buying rulebook, and DFARS adds DoD rules on top. Thresholds set the process: under $15,000 is a micro-purchase, and above $350,000 the full competition rules generally apply.
- New to this? Contract type decides who carries cost risk: fixed-price puts it on the contractor, cost-plus on the government.
- Bidding DoD work? Read Section M first, since it's how you're scored. An IDIQ award is a hunting license, not dinner: the money is in task orders.
- Government PM? Your COR monitors performance but can't authorize new work. Only the Contracting Officer can.
- Asked to do extra work? Raise a Request for Equitable Adjustment with the CO.
If you've spent any time near a DoD program office or a government contractor, you've heard the alphabet soup: FAR, DFARS, FFP, CPFF, IDIQ, COR, SAT, MPT. It's a lot. And if you're new to defense acquisitions, or coming from a different corner of it, federal contracting can feel like learning a second language before you're allowed to do your actual job.
This guide cuts through the noise. We'll walk through the Federal Acquisition Regulation (FAR) framework, every major contract type, how Indefinite Delivery/Indefinite Quantity (IDIQ) vehicles work, what source selection actually looks like, and what a Contracting Officer's Representative (COR) does every day. By the end, you'll have a working mental model of how DoD contracting actually functions. Not the textbook version, the real one.
The FAR: The Rulebook Behind Every Federal Contract
The Federal Acquisition Regulation (FAR) is the primary set of rules governing how the U.S. government buys goods and services. It's codified in Title 48 of the Code of Federal Regulations and applies to virtually every executive branch agency. Think of it as the Constitution of federal contracting. Everything else flows from it.
For DoD specifically, the Defense Federal Acquisition Regulation Supplement (DFARS) sits on top of the FAR. The DFARS adds DoD-specific requirements: cybersecurity standards (think CMMC and DFARS 252.204-7012), specialized cost accounting rules, and unique clauses that apply to defense systems and sensitive programs. The DFARS isn't supposed to conflict with the FAR (FAR 1.304(b)). Where DoD needs a different rule, because a statute requires it or through an approved FAR deviation, the DFARS states the DoD rule, and you follow it on DoD contracts.
The FAR is organized into parts. A few you'll encounter constantly:
- FAR Part 12: Commercial products and commercial services (streamlined procedures)
- FAR Part 13: Simplified acquisition procedures (for lower-dollar buys)
- FAR Part 15: Contracting by negotiation (competitive source selections)
- FAR Part 16: Contract types (the rules for FFP, CPFF, T&M, etc.)
- FAR Part 31: Contract cost principles (what costs are allowable)
- FAR Part 52: Contract clauses (the actual text that goes in contracts)
2026 heads-up: The FAR is mid-rewrite. Under the Revolutionary FAR Overhaul, DoD moved most solicitations to rewritten FAR and DFARS text through class deviations on 1 February 2026, and formal rulemaking is still under way (comments on the second batch of proposed rules closed 19 October 2026). The part numbers above still hold, but some section and clause numbers moved. For example, FAR 52.204-21 is 52.240-93 in the overhauled text.
Key insight: The FAR isn't just paperwork. It's a risk management framework. Every rule exists because of a past acquisition failure, a fraud case, or a Congressional mandate. Understanding the why behind a FAR clause makes compliance far easier than treating it as a box-checking exercise.
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Acquisition Thresholds: Where the Rules Change
Not every purchase triggers the same level of process. The FAR establishes thresholds that determine how much oversight, competition, and documentation a buy requires. As of October 1, 2025, these thresholds were updated for inflation.
Micro-Purchase Threshold (MPT): $15,000
Below $15,000 (raised from $10,000), the government can buy without soliciting multiple quotes, as long as the price is reasonable. Government purchase cards (GPCs) are the preferred payment method. This is the lowest tier; think office supplies, small equipment, minor services. For construction and services subject to labor standards, lower thresholds apply.
Simplified Acquisition Threshold (SAT): $350,000
Between the MPT and $350,000, agencies use Simplified Acquisition Procedures (SAP). Less competition documentation is required, and the process is faster. For contingency operations, the SAT jumps to $1 million inside the United States and $2 million outside it. Many clauses and requirements switch on above the SAT, but two big ones have their own, higher thresholds: small business subcontracting plans start above $900,000 ($2 million for construction), and certified cost or pricing data (TINA) at $2.5 million (DoD contracts signed after 30 June 2026 use $10 million, under sec. 1804 of the FY2026 NDAA).
Above the SAT: Full Competition Rules Apply
Above $350,000, buys generally move to sealed bidding (FAR Part 14) or contracting by negotiation (FAR Part 15). You need a formal solicitation (IFB or RFP), documented competition, and a source selection process. The big exception: commercial products and services up to $9 million can still use simplified procedures. Dollar thresholds also determine when a Contracting Officer (CO) needs a warrant at a certain level, when DCAA (Defense Contract Audit Agency) audits are triggered, and when certified cost or pricing data (TINA: Truth in Negotiations Act data) is required ($2.5 million and up; $10 million for DoD contracts signed after 30 June 2026).
Contract Types: The Most Important Decision in Any Acquisition
Contract type determines who bears financial risk: the government or the contractor. Get it wrong and you either overpay (government takes too much risk) or you drive your contractor into a loss position that kills performance (contractor takes too much risk). FAR Part 16 defines the major types. Here's what each one actually means for the people executing the contract:
Firm-Fixed-Price (FFP)
The government pays a set price, period. The contractor wins if it's efficient; it loses if costs run over. Fixed-price types are now the government's default and preferred contract types (Executive Order 14402, April 2026), because they align contractor incentives with performance and remove the need to audit incurred costs. FFP works best when requirements are well-defined, the marketplace is stable, and the contractor has done this work before. For example (hypothetical): buying 10,000 load-carrying vests at a set unit price, or renewing a software license at a fixed annual price.
Fixed-Price Incentive (FPI)
Still fixed-price at its core, but with a fee structure that rewards cost efficiency. FPI contracts set a target cost, target profit, and a ceiling price. If the contractor comes in below target cost, it shares the savings with the government; if it overruns, it absorbs a share of the excess. The share ratio (e.g., 80/20 government/contractor) is negotiated upfront. FPI is useful when requirements are reasonably defined but some cost risk remains. It's common in major weapon system production phases.
Cost-Plus-Fixed-Fee (CPFF)
The government reimburses all allowable costs plus pays a fixed fee that doesn't change regardless of actual costs. The contractor bears essentially zero financial risk, but that means less incentive to control costs. DCAA is deeply involved, auditing labor charges, indirect rates, and allowability of expenses. CPFF is appropriate when the work is truly uncertain: early-stage R&D, feasibility studies, basic research contracts. By statute, the fee on CPFF experimental, developmental or research contracts can't exceed 15% of estimated cost (FAR 15.404-4).
Cost-Plus-Incentive-Fee (CPIF)
Cost reimbursement with a fee that varies based on performance against a target cost. If the contractor comes in under target cost, its fee increases; if it overruns, the fee decreases, within a minimum/maximum fee band. CPIF puts some skin in the game while acknowledging genuine cost uncertainty. It's used in development programs where the scope is defined but technical risk is real. Think: major system development after preliminary design review (PDR).
Cost-Plus-Award-Fee (CPAF)
The contractor earns a base fee plus an additional award fee based on subjective government evaluation of performance. An Award Fee Board periodically assesses criteria like technical performance, management effectiveness, and schedule adherence. CPAF takes extra paperwork (a determination and findings signed by the head of the contracting activity) and shows up mostly in complex services contracts where the government wants to retain significant discretion over quality assessment. The FAR makes the award amount a unilateral decision "made solely at the discretion of the Government" (FAR 16.401), so a low score is very hard to challenge.
Time-and-Materials (T&M) and Labor-Hour (LH)
T&M contracts pay fixed hourly labor rates (which include overhead and profit) plus material costs at cost. Labor-Hour contracts are the same but without materials. These are the government's least preferred contract types because, in the FAR's words, they provide "no positive profit incentive to the contractor for cost control or labor efficiency." The contractor gets paid by the hour regardless of efficiency, up to a ceiling price that every T&M contract must include. They're appropriate only when it's truly impossible to estimate the scope upfront: emergency repairs, certain IT help desk contracts, or early-stage analysis work. FAR 16.601 requires a determination that no other type is suitable before using T&M.
Contract Type Comparison at a Glance
| Contract Type | Cost Risk (Who Bears It) | Best For | DCAA Involvement | Real DoD Example |
|---|---|---|---|---|
| FFP | Contractor | Well-defined requirements, stable market | Minimal (no cost auditing) | Spare parts buy, software license, commodity equipment |
| FPI | Shared (by ratio) | Production with some cost risk | Moderate (validates actuals at closeout) | F-35 production lots, destroyer construction |
| CPFF | Government | R&D, feasibility, early-stage work | High (continuous cost auditing) | Basic research contracts, many SBIR Phase II awards |
| CPIF | Primarily Government, contractor incentivized | Development with defined scope, real cost uncertainty | High | Major system EMD phase |
| CPAF | Government | Complex services needing subjective evaluation | High | Large base operations support, complex IT services |
| T&M / LH | Government, up to the ceiling price | Undefined scope, emergency work, support services | Moderate (validates labor categories/rates) | IT help desk support, emergency facility repairs |
| IDIQ | Varies by task order type | Recurring requirements with uncertain quantity/timing | Varies by task order type | OASIS+, NASA SEWP, Alliant 2 and 3, SeaPort NxG |
IDIQs and Task Orders: How Most DoD Work Actually Gets Done
Indefinite Delivery/Indefinite Quantity (IDIQ) contracts are the workhorses of DoD contracting. Rather than buying a specific quantity of a specific thing, an IDIQ establishes a pool of pre-vetted contractors (or a single contractor) against which the government can issue task orders or delivery orders over a period of time. The government commits to a minimum order (small, but required to be more than nominal) and establishes a maximum ceiling.
Why does DoD love IDIQs? Because requirements are often recurring but unpredictable. You know you'll need IT support, but you don't know exactly how much or when. IDIQs let the government get through competition once at the vehicle level, then issue orders quickly without re-competing from scratch every time.
Single-Award vs. Multi-Award IDIQs
A single-award IDIQ gives one contractor exclusive access. The government gets simplicity; the contractor gets a pipeline. Above $150 million (including options), FAR 16.504 requires a written determination by the head of the agency to justify a single award, because concentrating that much work with one vendor needs justification. (In the overhauled FAR text this rule sits at 16.504-3.)
A multi-award IDIQ (MAIDIQ) puts multiple awardees on contract. When the government needs work done, it issues a Request for Task Order Proposal (RTOP) to the awardees. This is called "fair opportunity": for each order above the micro-purchase threshold, every awardee gets a fair shot (FAR 16.505(b), 16.507-2 in the overhauled FAR text), unless an exception applies (e.g., urgency, only one awardee can do the work). Major MAIDIQ vehicles you'll encounter in DoD: OASIS+ (professional services), NASA SEWP (IT products; SEWP V was extended through 31 January 2027, and SEWP VI has been awarded with its period of performance anticipated to begin 1 November 2026), Alliant 2 and the newer Alliant 3 (IT services), and Navy's SeaPort NxG.
Contractor tip: Winning an IDIQ vehicle is a door opener, not a revenue guarantee. Your real money comes from winning task orders. Treat the IDIQ award as a hunting license, then focus your business development on task order capture.
BOAs, BPAs, and Other Vehicles
Basic Ordering Agreements (BOAs) and Blanket Purchase Agreements (BPAs) are similar tools. A BOA (FAR 16.703) establishes agreed terms for future orders but isn't a contract itself. Each order is a separate contract. A BPA (FAR 13.303) is a simplified "charge account" with qualified vendors for repeat needs; agencies also set up BPAs against GSA Schedule contracts. Neither guarantees any orders, but both streamline the ordering process once established.
Source Selection Basics: How the Government Chooses Its Contractors
Source selection is the process by which the government evaluates competing proposals and selects a contractor. For acquisitions above the SAT that aren't commercial items, the process typically follows FAR Part 15, Contracting by Negotiation.
The Solicitation: Section L and Section M
The Request for Proposals (RFP) is the key document. Two sections matter most for source selection (in the overhauled FAR Part 15, this uniform format is something contracting officers "should" use, not a hard rule, so labels can vary):
- Section L: Instructions to Offerors: Tells contractors how to structure and submit their proposal. Page limits, volume structure, formatting requirements, what information to include where.
- Section M: Evaluation Factors: Tells contractors how the government will score their proposal. Lists evaluation factors (e.g., technical approach, past performance, price) in order of importance. Section M is the single most important section for proposal writers.
Best Value vs. LPTA
The government uses two primary source selection approaches:
- Best Value Tradeoff: The government weighs technical merit, past performance, and price against each other. A higher-priced proposal can win if its technical superiority justifies the premium. Most complex acquisitions use this approach.
- Lowest Price Technically Acceptable (LPTA): Once a proposal meets a defined technical threshold, price is the only differentiator. The cheapest technically acceptable offer wins. LPTA is appropriate for commodities and well-defined services. Congress has actually restricted its use for major defense acquisition programs and certain other categories where quality matters (DFARS 215.101-2-70).
The Source Selection Team
Three key roles govern source selection:
- Source Selection Authority (SSA): The decision-maker. Signs the Source Selection Decision Document (SSDD) and is accountable for the award decision.
- Source Selection Evaluation Board (SSEB): The evaluators. Technical and past performance evaluators who score proposals against Section M criteria. Their findings feed up to the SSA.
- Source Selection Advisory Council (SSAC): Required under DoD's Source Selection Procedures for acquisitions of $100M or more, unless waived. Provides an independent comparative analysis and written recommendation to the SSA. (Not required for LPTA source selections.)
After evaluation, the CO may establish a competitive range and open discussions with offerors. After discussions close, offerors submit Final Proposal Revisions (FPRs). The SSA reviews the SSEB and SSAC reports, makes a best-value determination, and signs the SSDD. Award is made, and unsuccessful offerors are entitled to a debriefing.
Government tip: The SSDD is not just administrative paperwork. It's your legal defense in a protest. Every rating, every tradeoff, every comparative judgment must be documented thoroughly. Protests at GAO or the Court of Federal Claims (COFC) turn on whether the agency's evaluation was rational and consistent with stated criteria.
The COR: The Government's Eyes and Ears on Contract Performance
The Contracting Officer's Representative (COR) is one of the most important (and most often misunderstood) roles in federal contracting. CORs are government employees designated by the Contracting Officer (CO) to assist in technical monitoring and administration of a contract. They are the government's day-to-day presence on the contract.
Key COR responsibilities include:
- Monitoring contractor performance against the Statement of Work (SOW) or Performance Work Statement (PWS)
- Reviewing and accepting (or rejecting) deliverables
- Reviewing invoices for accuracy before the CO approves payment
- Providing input to Contractor Performance Assessment Reports (CPARS), the formal record of contractor performance
- Maintaining the COR file with surveillance records, correspondence, and documentation
- Communicating concerns to the CO (not directly directing the contractor to do new work)
What CORs cannot do is equally important: they have no contracting authority. A COR cannot authorize new work, approve contract changes, or make commitments on behalf of the government outside their specific delegation. Doing so creates an "unauthorized commitment," a serious problem that can only be fixed if an official with authority ratifies it (FAR 1.602-3, which is 1.405 in the overhauled FAR), and ratification isn't guaranteed.
Civilian agencies certify CORs under the FAC-COR (Federal Acquisition Certification for CORs) program, which carries continuous learning requirements and applies to every executive agency except DoD. DoD sets its own COR certification standard, with training through DAU (now WarU).
Contract Modifications: When Contracts Change
Contracts change. Requirements evolve, costs shift, timelines slip, the government exercises options. Contract modifications are the formal mechanism for making those changes.
There are two types:
- Bilateral modifications (SF-30): Both the government and the contractor sign. Used for changes within scope, definitizing letter contracts, and negotiated equitable adjustments. Both parties agree.
- Unilateral modifications: The government signs alone. Used to exercise options, make administrative changes, or issue change orders under the Changes clause (FAR 52.243-1 for fixed-price supplies and services, 52.243-2 for cost-reimbursement, 52.243-4 for construction). The contractor must comply and then has the right to request an equitable adjustment if costs increase; under FAR 52.243-1, it must assert that right within 30 days of the written order.
When a contractor believes it's been directed to do additional work beyond contract scope (formally or informally), it should pursue a Request for Equitable Adjustment (REA). REAs are informal; the contractor presents its case to the CO and they negotiate. If that fails, the contractor can convert the REA into a formal claim under the Contract Disputes Act (CDA), which triggers a mandatory CO decision and access to the Boards (Armed Services Board of Contract Appeals, or ASBCA) or Court of Federal Claims (COFC) for appeals.
Related Guides
Ready to go deeper on any of these topics? These cluster guides expand on each section with real-world examples, detailed tables, and practitioner tips:
- DoD Contract Types Compared: Fixed-Price vs. Cost-Plus and Everything In Between: A deep dive into all contract types, DCAA involvement, and when DoD uses each one
- The DoD Source Selection Process: How the Government Chooses Its Contractors: The full source selection timeline from pre-solicitation to award, debriefs, and protests
- COR Responsibilities: What Every Contracting Officer's Representative Must Know: The 6 core COR duties, what CORs cannot do, CPARS drafting, and training requirements
- Contract Modifications, REAs, and Claims: When Defense Contracts Change: Step-by-step guide to REAs, the CDA claims process, and appeals at ASBCA and COFC
Want to go from reading about contracting to doing it? Acqlerate's Defense Contracting Fundamentals module (Module 3) walks through contract types, source selection, COR duties, and modifications with scenario-based exercises built for Contracting Specialists, KOs, and program managers, and contractor professionals. Explore the module
Frequently Asked Questions
What is the difference between the FAR and DFARS?
The FAR (Federal Acquisition Regulation) is the government-wide set of rules for federal contracting, applicable to all executive branch agencies. The DFARS (Defense Federal Acquisition Regulation Supplement) adds DoD-specific requirements on top of the FAR, things like cybersecurity standards (DFARS 252.204-7012), unique cost accounting rules, and defense-specific clauses. For DoD contracts, you follow both. The DFARS isn't supposed to contradict the FAR; where DoD needs a different rule (by statute or an approved deviation), the DFARS spells it out and governs DoD contracts.
What is the Simplified Acquisition Threshold and why does it matter?
As of October 1, 2025, the Simplified Acquisition Threshold (SAT) is $350,000. Below this amount, contracting officers can use simplified acquisition procedures: faster, less documentation-intensive processes. Above it, full competition rules generally apply (commercial buys up to $9 million can still use simplified procedures). Many clauses switch on above the SAT, so it's a major dividing line in acquisition planning, though some big requirements have their own thresholds: subcontracting plans above $900,000 and certified cost or pricing data at $2.5 million ($10 million on new DoD contracts).
When should the government use a cost-plus contract instead of fixed-price?
Cost-plus contracts (CPFF, CPIF, CPAF) are appropriate when requirements are truly uncertain and it's impossible for the contractor to estimate costs accurately enough to accept fixed-price risk without building in an unreasonable contingency. Early-stage R&D, new technology development, and first-of-a-kind systems are classic cases. The trade-off is more DCAA audit involvement and less contractor incentive to control costs, which is why cost-plus should only be used when truly necessary.
What is an IDIQ and how do task orders work?
An Indefinite Delivery/Indefinite Quantity (IDIQ) contract is a vehicle that allows the government to buy an unspecified quantity of supplies or services within a set period. The actual work is ordered through task orders (for services) or delivery orders (for products). Multi-award IDIQs (MAIDIQs) give multiple contractors a spot on the vehicle, then require "fair opportunity" when individual task orders are issued, meaning all awardees get a chance to compete for each order, unless a specific exception applies.
What happens if a COR approves work outside their authority?
If a COR directs a contractor to perform work not authorized by the contract, or makes commitments that bind the government without CO authority, this creates an "unauthorized commitment." The contractor may not be paid for that work unless an official with authority ratifies the commitment (which requires specific conditions to be met and is not guaranteed). This is why COR training emphasizes the critical distinction between technical monitoring (what CORs do) and contracting authority (what only the CO has).