Contract Types
Overview
This page outlines contract types commonly used in technology procurement, especially by federal, state, and local governments in the United States. It includes descriptions, performance assurance methods, vendor lock-in tendencies, and suitability for agile projects.
Contract Types
1. Indefinite Delivery, Indefinite Quantity (IDIQ)
Description: IDIQ contracts are used when the exact quantity of goods or services is unknown. They define a ceiling and set minimum/maximum quantities.
Performance Assurance:
- Task/delivery orders define metrics
- SLAs are included
- Performance reviewed per order
Vendor Lock-in:
- Moderate to high with single vendor
- Lower with multi-award IDIQs (task order competition)
Agile Suitability:
- Good fit with multi-vendor, flexible task orders
- Supports iterative and evolving work
2. Blanket Purchase Agreements (BPA)
Description: Simplified method to fulfill recurring needs through pre-arranged "accounts" with vendors.
Performance Assurance:
- Deliverables/metrics specified per order
- Periodic vendor performance reviews
Vendor Lock-in:
- Moderate, higher with single-award BPAs
- Lower with multi-award flexibility
Agile Suitability:
- Suitable for short-term, iterative agile orders
- Aligns well with agile sprint structures
3. Standing Offers
Description: Pre-arranged terms/pricing with one or more vendors for recurring needs. Common in Canada; sometimes used by U.S. cities.
Performance Assurance:
- Managed at the call-up level
- Periodic review by buyer
Vendor Lock-in:
- Moderate; mitigated with multiple vendors
- Price competition possible per order
Agile Suitability:
- Adaptable to agile with flexible call-ups
- Requires agile-savvy management
4. Time and Materials (T&M)
Description: Vendor is paid for time and materials used. Useful when scope is uncertain.
Performance Assurance:
- Requires tight oversight and time tracking
- Often capped or milestone-billed
Vendor Lock-in:
- High if vendor accumulates system knowledge or uses proprietary tools
- Reduced by knowledge transfer clauses
Agile Suitability:
- Excellent fit—ideal for evolving, iterative agile work
5. Fixed-Price Contracts (Firm-Fixed Price or FFP)
Description: Vendor delivers a defined scope for a fixed price.
Performance Assurance:
- Based on milestones or deliverables
- Strong contractual enforcement
Vendor Lock-in:
- Low with well-defined, portable outputs
- Higher if tied to proprietary tech
Agile Suitability:
- Poor fit unless broken into small, iterative contracts
- Inhibits scope flexibility
6. Cost-Reimbursement Contracts (Cost-Plus)
Description: Government reimburses allowable costs plus a fee. Used in R&D or high-risk projects.
Performance Assurance:
- Requires audits and cost justification
- May include performance incentives
Vendor Lock-in:
- High due to IP dependency or accumulated knowledge
- Mitigated with IP clauses and transition plans
Agile Suitability:
- Good for R&D and early agile stages
- Less suited for scaled delivery
7. Multiple Award Schedules (MAS) / GSA Schedules
Description: Pre-qualified vendor schedules negotiated with the GSA. Agencies issue orders under the schedule.
Performance Assurance:
- Each order may include deliverables and SLAs
- Performance can be reviewed annually
Vendor Lock-in:
- Low if multiple vendors are on schedule
- Easy vendor switching supports flexibility
Agile Suitability:
- Works well with modular agile projects
- Supports iterative contracting
8. Managed Services Agreements
Description: Vendor manages a service (e.g., IT, cloud) under a long-term agreement.
Performance Assurance:
- SLAs, uptime requirements, incident metrics
- Penalties/incentives tied to performance
Vendor Lock-in:
- High, especially with proprietary systems
- Requires strong transition clauses
Agile Suitability:
- Weak unless vendor uses agile service delivery
- Better for stable, ongoing services
Summary Table
| Contract Type | Performance Assurance | Vendor Lock-In Risk | Agile Project Fit |
|---|---|---|---|
| IDIQ | Per task order, SLAs | Moderate | Good (multi-award best) |
| BPA | Per order, cumulative | Moderate | Good |
| Standing Offer | Per call-up | Moderate | Fairly Good |
| T&M | Time tracking, oversight | High | Excellent |
| Fixed-Price (FFP) | Milestones, penalties | Low-Moderate | Poor |
| Cost-Reimbursement | Audits, reporting | High | Good (early stage) |
| MAS / GSA Schedules | Per order | Low-Moderate | Good |
| Managed Services | SLAs, penalties | High | Poor-Fair |
Other International Contract Types in Technology Procurement
1. Framework Agreements (EU, UK, Australia, Canada)
Description: Similar to U.S. BPAs or Standing Offers, these agreements establish terms with one or more suppliers over a period, allowing government entities to place specific orders (call-offs).
Countries: EU Member States, UK (Crown Commercial Service), Canada, Australia
Performance Assurance:
- Managed at call-off stage
- KPIs and SLAs often embedded in call-offs
Vendor Lock-in:
- Low if multiple vendors are eligible
- Higher in single-supplier frameworks
Agile Suitability:
- Strong, especially if call-offs support modular/agile delivery
2. Public-Private Partnerships (PPP or P3)
Description: Long-term contracts where private entities design, build, finance, and operate technology services or infrastructure.
Countries: Canada, UK, EU, India, South Africa
Performance Assurance:
- Strong contractual enforcement
- Linked to service availability and outcome delivery
Vendor Lock-in:
- High, due to long terms and infrastructure ownership
- Exit strategies often complex and costly
Agile Suitability:
- Poor for agile delivery unless modular sub-contracts are used
3. Innovation Partnership Contracts (EU Directive 2014/24/EU)
Description: A procurement process that allows for R&D and eventual purchase in a single framework, aimed at buying products/services that do not yet exist.
Countries:
- Countries under EU procurement rules
Performance Assurance:
- Based on agreed development phases and deliverables
- Includes checkpoints for continuation or termination
Vendor Lock-in:
- Moderate to high due to co-developed IP and custom solutions
Agile Suitability:
- Excellent—supports iterative development and collaborative R&D
4. Two-Stage Open or Competitive Dialogue (EU, UK)
Description: Procurement where buyers first engage in structured discussions with bidders to define needs, then invite refined proposals.
Countries:
- EU
- UK
- South Africa
- Australia
Performance Assurance:
- Based on final contracts post-dialogue
- Aligns deliverables with refined, better-scoped requirements
Vendor Lock-in:
- Low to moderate
- Tends to result in better-scoped, more competitive contracts
Agile Suitability:
- Very suitable—encourages flexible requirements definition and co-design
5. Rate Contracts (India and other South Asian countries)
Description: Pre-negotiated pricing and terms for goods and services, often managed by a central procurement agency (e.g., GeM in India).
Countries:
- India
- Bangladesh
- Sri Lanka
Performance Assurance:
- At the ordering agency's discretion
- May lack rigorous monitoring if centrally managed
Vendor Lock-in:
- Low—government agencies can choose from multiple suppliers
Agile Suitability:
- Moderate—usable for agile support services, but limited in flexibility
Summary of Key International Additions
| Contract Type | Region | Agile Fit | Lock-in Risk | Notes |
|---|---|---|---|---|
| Framework Agreement | UK, EU, Canada | Good | Low–Moderate | Similar to U.S. BPA/IDIQ |
| PPP / P3 | Global | Poor | High | Long-term, infra-heavy |
| Innovation Partnership | EU | Excellent | Moderate | Built for co-development |
| Competitive Dialogue | UK, EU | Very Good | Low | Supports design-phase iteration |
| Rate Contracts | India, South Asia | Moderate | Low | Useful for commodity tech services |