What is a primary objective when deciding on a contract type?

The primary objective when deciding on a contract type is to negotiate reasonable contractor risk. This is essential because different contract types allocate risk differently between the government and the contractor. Understanding how risks will be distributed helps ensure that both parties are protected and that the contractor has appropriate incentives to perform.

In selecting a contract type, the aim is to find a balance that aligns the contractor’s performance with the government's requirements while also considering the uncertainties and risks inherent in the project. For instance, fixed-price contracts place more risk on the contractor, who must deliver within budget, whereas cost-reimbursement contracts shift more risk to the government, who covers allowable costs.

Other considerations, such as encouraging competition or maximizing government oversight, while important, serve different objectives in the contract management process. They do not directly address the fundamental issue of how risk is shared, which is central to establishing the right contract structure for successful project outcomes.