Bidding Federal Construction Under FAR 36.206 and FAR 36.207
Pricing construction proposals for the federal government requires estimators, trade subcontractors, and small general contractors to navigate specific procurement standards that differ from private commercial bidding. Two central provisions governing federal pricing structure and schedule risk are FAR 36.206 and FAR 36.207. Understanding how federal agencies evaluate delayed performance remedies and how contracting officers structure bid pricing will help you build accurate proposals while avoiding unwarranted financial exposure.
How Contracting Officers Evaluate Liquidated Damages Under FAR 36.206
On federal projects, schedule liability is not an arbitrary figure inserted by the prime contractor. According to FAR 36.206, the contracting officer must evaluate the need for liquidated damages in a construction contract in accordance with 11.502 and agency regulations. This means that whenever a solicitation includes daily damages for delayed completion, that requirement stems from a formal assessment performed by the agency.
When reviewing federal solicitations, estimators must check whether the government has included a rate for daily damages. If you are bidding as a subcontractor, verify whether the prime contractor passes down these identical terms or attempts to impose separate liabilities. Understanding the baseline federal assessment under FAR 36.206 Liquidated damages allows bidders to review project timelines realistically and prepare for schedule risks that match the agency's formal terms, as outlined in our review of liquidated damages in construction.
Selecting the Required Contract Type Under FAR 36.207(a)
Federal procurement rules set clear standards for how construction pricing must be established. Under FAR 36.207(a), firm-fixed-price contracts generally shall be used to acquire construction. The regulation establishes that these contracts may be priced through three distinct methods:
- On a lump-sum basis, where a single lump sum is paid for the total work or defined parts of the scope.
- On a unit-price basis, where payment is calculated based on a unit price paid for a specified quantity of work units.
- Using a combination of both lump-sum and unit-price methods.
For interior framing, drywall, acoustic ceilings, and general trades, most federal solicitations require a lump-sum proposal. However, solicitations may divide work so that specific scopes utilize unit rates while the remainder is covered under a fixed sum, aligning with the principles discussed in our guide to lump sum vs unit price contracts.
Evaluating the Four Exceptions to Lump-Sum Preference Under FAR 36.207(b)
Under FAR 36.207(b), contracting officers are instructed that lump-sum pricing shall be used in preference to unit pricing. However, the federal government establishes four specific conditions where unit pricing or alternative structures are appropriate:
- When large quantities of work such as grading, paving, building outside utilities, or site preparation are involved.
- When quantities of work, such as excavation, cannot be estimated with sufficient confidence to permit a lump-sum offer without a substantial contingency.
- When estimated quantities of work required may change significantly during construction.
- When offerors would have to expend unusual effort to develop adequate estimates.
If a federal project involves unpredictable site conditions or fluctuating scopes, reviewing these four exceptions helps contractors determine whether to request unit-price line items during the pre-bid inquiry period instead of carrying risky assumptions.
Assessing Fixed-Price Contracts with Economic Price Adjustment Under FAR 36.207(c)
Material price fluctuations can disrupt long-term federal projects. Under FAR 36.207(c), fixed-price contracts with economic price adjustment may be used under two circumstances. First, they can be utilized if an adjustment provision is customary in contracts for the specific type of work being acquired. Second, they may be applied when omitting an adjustment provision would preclude a significant number of firms from submitting offers, or would result in offerors including unwarranted contingencies in proposed prices.
When estimators encounter federal solicitations for scopes subject to extreme supply volatility, checking for economic price adjustment clauses can prevent the need to inflate bids with defensive contingencies.
Actionable Bidding Steps for Subcontractors and Small GCs
To align your federal bid submissions with FAR 36.206 and FAR 36.207, follow these practical steps during your estimate setup:
- Check the solicitation specifications to see whether the contracting officer evaluated and included liquidated damages under 11.502 and agency rules.
- Confirm whether the bid schedule requests a single lump sum, defined lump sums for distinct parts of the work, or unit-price breakdowns.
- Identify whether excavation, civil site preparation, or volatile scopes justify unit pricing under the four exceptions in FAR 36.207(b).
- Verify whether an economic price adjustment clause is included under FAR 36.207(c) to avoid loading unwarranted contingencies into your baseline numbers.
Sources
FAR 36.206 Liquidated damages. | Acquisition.GOV
FAR 36.207 Pricing fixed-price construction contracts. | Acquisition.GOV
Published October 29, 2026. No affiliate links on this page. Facts come from the sources linked above; check them for updates.