Rick is the project manager for TTM project. He is in the process of procuring services from vendors.
He makes a contract with a vendor in which he precisely specify the services to be procured, and any
changes to the procurement specification will increase the costs to the buyer.
Which type of contract is this?
A.
Firm Fixed Price
B.
Fixed Price Incentive Fee
C.
Cost Plus Fixed Fee Contract
D.
Fixed Price with Economic Price Adjustment
Explanation:
Rick has prepared a Firm Fixed Price contract (FFP). In such contracts, the buyer must precisely
specify the product or services to be procured, and any changes to the procurement specification
can increase the costs to the buyer. This is the most commonly used contract type.
Answer option B is incorrect. In Firm Price Incentive Fee (FPIF) contracts, a price ceiling is set, and all
costs above the price ceiling are the responsibility of the seller, who is obligated to complete the
work.
Answer option D is incorrect. Fixed Price with Economic Price Adjustment (FP-EPA) is intended to
protect both buyer and seller from external conditions beyond their control.
Answer option C is incorrect. Cost Plus Fixed Fee Contracts charge back all project costs to the seller
and include a fixed fee upon completion of the contracts.
“A Guide to the Project Management Body of Knowledge, (PMBOK Guide), Fourth
Edition.”