Which type of contract is used for services that are provided over time with varied costs?

Cost-reimbursement contracts are typically used for services that are provided over an extended period with varied costs. This contract type allows the contractor to be reimbursed for their allowable costs incurred during the performance of the contract. It is particularly suitable for situations where the exact scope of work cannot be clearly defined upfront, leading to uncertainties in cost estimation.

In a cost-reimbursement contract, the government assumes the risk of unknown costs, which is appropriate for research and development activities or projects where technical uncertainties exist. This flexibility enables contractors to adjust as necessary based on the actual costs incurred.

While fixed-price contracts are helpful for well-defined projects with predictable costs, they do not accommodate the variability in costs associated with services provided over time. Time and materials contracts, although they do allow for changes and are more flexible than fixed-price, are structured based on labor rates and material costs rather than actual reimbursement for incurred costs. Indefinite delivery contracts are tailored for indefinite quantities of supplies or services during a fixed period and do not directly correlate to the varied costs of services over an extended timeline.