arrangement is appropriate where the requirements are not well established at the time of award
Sort of. Cost-reimbursement (CR) contracts “are suitable for use only when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.”
The requirements for any prospective contract should be established at the time of award. The performance of a contractor’s work in support of those requirements, such as the level of effort, may be difficult to estimate. Thus, CR contracts provide flexibility for the government to pay for work performed by its contractor against the stated requirements (e.g., in scope work).
For instance, a contractor may be hired to excavate and replace a parking lot. The composition of the underlying earth is unknown, making it impossible for the contractor and the government to adequately estimate the time and resources required. However, the requirement to excavate and replace the parking lot is well established.
See specifically subsection 16.301-2: https://acquisition.gov/far/current/html/Subpart%2016_3.html
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