FAR considers which two elements when defining contract types?

The correct response identifies contractor responsibility and profit incentive as critical elements when defining contract types under the Federal Acquisition Regulation (FAR). Understanding these components is essential in the context of contract management and procurement processes.

Contractor responsibility refers to the capability of the contractor to perform the work as required by the contract, ensuring they possess the necessary qualifications, experience, and resources. This consideration is crucial for determining the type of contract that can be awarded and the level of oversight required.

Profit incentive is also a key factor as it influences how projects are structured financially. Different contract types offer varying levels of profit potential based on performance outcomes, motivating contractors to meet or exceed expectations. For instance, fixed-price contracts provide more profit certainty for contractors if they can manage costs effectively, while cost-reimbursable contracts may carry less risk for contractors but require more oversight from the government to control costs.

In summary, focusing on contractor responsibility ensures that only capable firms are engaged, while evaluating profit incentives aligns the contractor's motivations with project success, which is foundational for establishing the appropriate type of contract.