Federal contracts fall into families that allocate risk differently between government and contractor.
Fixed-price
You deliver at an agreed price. Overruns are yours; savings are yours. Favored for well-defined work.
Cost-reimbursement
The government pays allowable costs plus a fee. Lower contractor risk, heavier accounting requirements. Used for uncertain or research work.
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Time-and-materials
Hourly rates plus materials, with a ceiling. Used when scope cannot be defined up front.
Why it matters
Your accounting system, pricing strategy and risk tolerance must match the type. Cost-type work requires an approved accounting system.