Dictionary of Procurement Terms

The authority delegated to persons for entering into and approving contracts.

A person with the authority to enter into, administer, or terminate contracts, and make related determinations and findings.

The process of establishing contracts with private suppliers to provide a product, service, or business process that was previously provided by the entity’s internal (inhouse) resources. The entity maintains responsibility for the provision of the product, service, or business process. See also: Insourcing (in-house), Outsourcing.

Any individual or business having a contract with a governmental body to furnish goods, services, or construction for an agreedupon price.

Problems or issues that could arise from the performance of a contract which would hurt the outcomes or operations of the contract.

A cost-reimbursement contract in which the contractor receives no fee. See also: Cost-Reimbursement Contract.

A cost reimbursement contract that provides for a base fee amount fixed at the inception of a contract. A CPAF also includes an additional fee to be determined at the time of award that is based on an evaluation by the purchaser regarding the quality of the contract performance and the evaluator’s assessment regarding the fee amount necessary to motivate the contractor toward excellence.

A contract that provides for the contractor to be reimbursed for all incurred costs related to their performance of the contract, plus a predetermined fixed amount.

A contract whereby the contractor receives additional compensation for keeping the total amount expended below the agreed-upon maximum contract amount, or for achieving certain pre-specified goals during the performance of the contract.

An agreement in which the contractor is provided a specified percentage profit over and above the actual costs. This pricing method is generally prohibited, or at least discouraged, because it provides an incentive for the contractor to increase, rather than decrease, costs.