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choosing the right contract type is a critical part of acquisition planning and the federal acquisition regulation or far provides a wide variety of contract types that are available for contracting officers to use far part 16 describes the different contract types that may be used in acquisitions contract types can generally be classified into three categories fixed price contracts cost reimbursement contracts and time and materials and labor hour contracts selecting the appropriate contract type is very important as it is a driver of risk incentives and obligations for both the government and the contractor under a fixed price contract the government assumes the least amount of risk and under a cost reimbursement contract the government assumes the greatest amount of risk time and materials contracts and labor hour contracts fall somewhere in the middle of the spectrum lets learn a little more about the three general categories of contract types first well talk about fixed price c