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TOPIC: Contract risks

Contract risks 4 years 8 months ago #2768

  • Sathye Gomathy
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Hello: I have been going in circles about questions on Contract risks in Procurement Management.

Could someone please tell me the correct answer to the following question and help me rate the risks in contract types from low to high?

Here is the question:

Which of the following contracts has the most risk for the Buyer?
A. Cost plus fixed fee (CPFF)
B. Time and Materials (T&M)
C. Cost plus award fee (CPAF)
D. Fixed price (FP)

I had always thought the risk goes like this
CPPC - Highest for buyer
CPFF
CPAF
CPIF
T&M
FPEPA
FPIF
FP - Lowest for the Buyer

So my answer was (A - Cost plus fixed fee) however the correct answer was told to be (B - Time and Materials).

Any help clarification, much appreciated.

Thanks!

Re:Contract risks 4 years 7 months ago #2793

  • Gbolahan Okulaja
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The answer is correct,the first time i went through the question,i chose B before i saw your comment.
T&M pays the seller far more than the buyer,as period of the contract increases the seller gets more.
Cost plus fixed fee (CPFF), Cost plus award fee (CPAF) do serve as a good relief/comfortable to the buyer just as it is with FP.

Gbolahan,PMP.

Re:Contract risks 4 years 7 months ago #2794

  • Sathye Gomathy
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Thanks much!!
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