Federal contract types explained: fixed-price, T&M, IDIQ and MATOC
Federal solicitations say what kind of contract you will sign, and it changes who carries the cost risk and how you get work. These are the types small contractors meet most often.
| Type | How it works | Risk for you |
|---|---|---|
| Firm-fixed-price (FFP) | One price for the defined work, whatever it costs you. The most common type for construction and many services. | High: overruns are yours, savings too. |
| Time-and-materials (T&M) / labor-hour | Fixed hourly rates plus materials at cost, up to a ceiling. | Medium: your rates must cover overhead and profit. |
| Cost-reimbursement | Allowable costs are paid plus a fee. Requires an accounting system the government accepts. | Low on cost, but heavy on compliance. |
| IDIQ (indefinite delivery, indefinite quantity) | A framework with a minimum and maximum; work is ordered later through task or delivery orders. | Winning it does not guarantee work beyond the minimum. |
| MATOC / SATOC | Multiple-award or single-award task order contracts, common in construction: a pool of pre-qualified contractors competes for each task order. | You compete again for every order. |
| BPA (blanket purchase agreement) | A simplified way for an agency to buy repeatedly from a supplier, with calls against it. | Like an IDIQ: no guaranteed volume. |
What it means for small businesses
- Most small business set-aside construction and service jobs are firm-fixed-price, so pricing discipline matters more than anything else.
- Large IDIQ and MATOC award values are often ceilings for the whole pool over many years, not money one company receives. That is why some award notices show very large amounts.
- Getting on a MATOC can be worth a lot over time, but budget for the effort of competing for each task order.
Next: notice types on SAM.gov and how you get paid.
Last reviewed October 20, 2026. This guide is general information, not legal advice. Rules and dollar thresholds change, so check the solicitation and the official sources linked above.