FAR 16.402-1 Cost incentives
Subsection Federal Acquisition Regulation
Facts
- Citation
- FAR 16.402-1
- Type
- Subsection
- Last amended
- 74 FR 52856 Effective Oct 14, 2009
- Proposed changes
- 1
- Text as of
- FAC 2026-01
- Official text
- acquisition.gov
Text from acquisition.gov. Federal Register history from the Federal Register's records of the rules that amended this subsection.
Text
(a) Most incentive contracts include only cost incentives, which take the form of a profit or fee adjustment formula and are intended to motivate the contractor to effectively manage costs. No incentive contract may provide for other incentives without also providing a cost incentive (or constraint).
(b) Except for award-fee contracts (see 16.404 and 16.401(e)), incentive contracts include a target cost, a target profit or fee, and a profit or fee adjustment formula that (within the constraints of a price ceiling or minimum and maximum fee) provides that-
(1) Actual cost that meets the target will result in the target profit or fee;
(2) Actual cost that exceeds the target will result in downward adjustment of target profit or fee; and
(3) Actual cost that is below the target will result in upward adjustment of target profit or fee.
Federal Register history
| Final rule | Published | Effective |
|---|---|---|
| Federal Acquisition Regulation; FAR Case 2008-008, Award Fee Language Revision |
Proposed changes
| Proposed rule | Published | Comments |
|---|---|---|
| Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 16, 17, and 35 | Closed Oct 19, 2026No final rule found |
Sections cited
- FAR 16.404 Fixed-price contracts with award fees
- FAR 16.401(e) General
Quick answers
What is FAR 16.402-1?
FAR 16.402-1 is a subsection of the Federal Acquisition Regulation, titled "Cost incentives".
When was FAR 16.402-1 last changed?
The most recent final rule on record is "Federal Acquisition Regulation; FAR Case 2008-008, Award Fee Language Revision" (74 FR 52856), published Oct 14, 2009 and effective Oct 14, 2009.
Are changes to FAR 16.402-1 proposed?
One proposed change has no final rule yet.
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