Regulation of contract types -- Permitted and prohibited contract types.
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(1) Except as otherwise provided in this section, and subject to rules made under this section by the rulemaking authority, a procurement unit may use any type of contract that will promote the best interests of the procurement unit.
(2) A rulemaking authority:
(a) may make rules governing, placing restrictions on, or prohibiting the use of any type of contract; and
(b) may not make rules that permit the use of a contract:
(i) that is prohibited under this section; or
(ii) in a manner that is prohibited under this section.
(3) A procurement official may not use a type of contract, other than a firm fixed price contract, unless the procurement official makes a written determination that:
(a) the proposed contractor's accounting system will permit timely development of all necessary cost data in the form required by the specific contract type contemplated;
(b) the proposed contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles; and
(c) the use of a specified type of contract, other than a firm fixed price contract, is in the best interest of the procurement unit, taking into consideration the following criteria:
(i) the type and complexity of the procurement item;
(ii) the difficulty of estimating performance costs at the time the contract is entered into, due to factors that may include:
(A) the difficulty of determining definitive specifications;
(B) the difficulty of determining the risks, to the contractor, that are inherent in the nature of the work to be performed; or
(C) the difficulty to clearly determine other factors necessary to enter into an accurate firm fixed price contract;
(iii) the administrative costs to the procurement unit and the contractor;
(iv) the degree to which the procurement unit is required to provide technical coordination during performance of the contract;
(v) the impact that the choice of contract type may have upon the level of competition for award of the contract;
(vi) the stability of material prices, commodity prices, and wage rates in the applicable market;
(vii) the impact of the contract type on the level of urgency related to obtaining the procurement item;
(viii) the impact of any applicable governmental regulation relating to the contract; and
(ix) other criteria that the procurement officer determines may relate to determining the contract type that is in the best interest of the procurement unit.
(4) Contract types that, subject to the provisions of this section and rules made under this section, may be used by a procurement unit include the following:
(a) a fixed price contract;
(b) a fixed price contract with price adjustment;
(c) a time and materials contract;
(d) a labor hour contract;
(e) a definite quantity contract;
(f) an indefinite quantity contract;
(g) a requirements contract;
(h) a contract based on a rate table in accordance with industry standards; or
(i) a contract that includes one of the following construction delivery methods:
(i) design-build;
(ii) design-bid-build; or
(iii) construction manager/general contractor.
(5) Except as it applies to a change order, a procurement unit may not enter into a cost-plus-percentage-of-cost contract, unless:
(a) use of a cost-plus-percentage-of-cost contract is approved by the procurement officer;
(b) it is standard practice in the industry to obtain the procurement item through a cost-plus-percentage-of-cost contract; and
(c) the percentage and the method of calculating costs in the contract are in accordance with industry standards.
(6) A procurement unit may not enter into a cost-reimbursement contract, unless the procurement official makes a written determination that:
(a)
(i) a cost-reimbursement contract is likely to cost less than any other type of permitted contract; or
(ii) it is impracticable to obtain the procurement item under any other type of permitted contract; and
(b) the proposed contractor's accounting system:
(i) will timely develop the cost data in the form necessary for the procurement unit to timely and accurately make payments under the contract; and
(ii) will allocate costs in accordance with generally accepted accounting principles.